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Alternative Monetary Policy Frameworks for Price and Financial Stability

Author

Listed:
  • Dongkoo Chang

    (South East Asian Central Banks (SEACEN) Research and Training Centre)

  • Vincent Choon-Seng Lim

    (South East Asian Central Banks (SEACEN) Research and Training Centre)

  • Eufrocinio M. Bernabe, Jr.

    (South East Asian Central Banks (SEACEN) Research and Training Centre)

Abstract

With revolutionary changes of the financial environment, due in particular to the progress of information and communication technology and the aftermath of the global financial crisis, central banks are facing new challenges in the pursuit of price, financial and exchange rate stability. This research paper looks at how central banks can enhance the effectiveness of monetary policy when in practice, the policy tools available to them are rather limited. In fact, many of them have no better option but short-term interest rates. This paper compares three alternative monetary policy operation frameworks viz. the Channel System, Interest-on-Reserves and Asset-based Reserve Requirements. All the three frameworks have one thing in common - they all allow central banks to preserve their leverage over short-term interest rates and effectively pursue financial stability by controlling the total volume of credit in the economy. However, their practical implementation varies to a large degree.

Suggested Citation

  • Dongkoo Chang & Vincent Choon-Seng Lim & Eufrocinio M. Bernabe, Jr., 2014. "Alternative Monetary Policy Frameworks for Price and Financial Stability," Working Papers wp06, South East Asian Central Banks (SEACEN) Research and Training Centre.
    • Handle: RePEc:sea:wpaper:wp06
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Central Bank; Monetary Policy; New Normal; Financial Stability; Channel System; Interest-on-Reserves Regime; Asset-Based Reserve Requirements;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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