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The use of money and credit measures in contemporary monetary policy

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  • Chris Bloor
  • Chris Hunt
  • Tim Ng
  • Hamish Pepper

    (Reserve Bank of New Zealand)

Abstract

The changing interaction between economic and financial developments around the world is prompting lively debate in the academic and central banking community about the use of money and credit measures in contemporary monetary policy formulation. Currently, money and credit measures generally have a fairly low, but arguably increasing, profile in the panoply of models and economic indicators used in central banks’ assessments of the economic outlook. Some prominent academics and central banks advocate increased emphasis on money and credit measures. In this view, credit developments in particular can materially enrich our understanding of the economic outlook when financial asset markets and the price of credit risk are moving substantially. At the same time, there are prominent sceptics on the specific value of money in understanding and predicting inflation. In New Zealand monetary policy formulation, we tend to focus on disaggregated credit measures, and mostly to provide corroborating information about particular developments in the various sectors of the economy. Increasing international financial integration and a greater emphasis on the interaction between financial stability assessment and monetary policy may see increased use and profile of credit measures in the future.

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Bibliographic Info

Article provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.

Volume (Year): 71 (2008)
Issue (Month): (March)
Pages:

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Handle: RePEc:nzb:nzbbul:march2008:2

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  1. Woodford, M., 1997. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Papers, Stockholm - International Economic Studies 632, Stockholm - International Economic Studies.
  2. Alfred Wong & Arthur Grimes, 1991. "The New Zealand monetary aggregates," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, Reserve Bank of New Zealand, vol. 54, december.
  3. John Tait, 1989. "The use of monetary aggregates as monetary policy indicators," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, Reserve Bank of New Zealand, vol. 52, December.
  4. Reynard, Samuel, 2007. "Maintaining low inflation: money, interest rates, and policy stance," Working Paper Series, European Central Bank 0756, European Central Bank.
  5. W A Razzak, 2001. "Money in the era of inflation targeting," Reserve Bank of New Zealand Discussion Paper Series DP2001/02, Reserve Bank of New Zealand.
  6. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting "M" back in monetary policy," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 761, Board of Governors of the Federal Reserve System (U.S.).
  7. Bennett T. McCallum, 2001. "Monetary Policy Analysis in Models Without Money," NBER Working Papers 8174, National Bureau of Economic Research, Inc.
  8. Siklos, Pierre L. & Eckhold, Kelly R., 1997. "Income Velocity in Turbulent Times: The Role of Institutional Factors in the New Zealand Experience," Journal of Macroeconomics, Elsevier, Elsevier, vol. 19(1), pages 31-52, January.
  9. David Longworth, 2003. "Money in the Bank (of Canada)," Technical Reports, Bank of Canada 93, Bank of Canada.
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Cited by:
  1. Ross Kendall & Tim Ng, 2013. "The 2012 Policy Targets Agreement: an evolution in flexible inflation targeting in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, Reserve Bank of New Zealand, vol. 76, pages 3-12, December.

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