Monetary policy implementation: A European Perspective
AbstractMonetary policy implementation is one of the most significant areas of interaction between central banking and financial markets. Historically, how this interaction takes place has been viewed as having an important impact on the ultimate objective of monetary policy, for example price stability or stimulating economic growth. In this article, we survey different approaches to monetary policy implementation. We cover briefly some of the historical trends, but give particular attention to the practice that is now (again) very common world-wide; namely, targeting short term interest rates. We discuss various ways this can be done and the implications for financial markets. We emphasize different European approaches, while also providing comparisons with the Fed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2007/10.
Length: 35 pages
Date of creation: 27 Mar 2007
Date of revision:
Contact details of provider:
Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
More information through EDIRC
Monetary policy; short term interest rates; financial markets;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-09 (All new papers)
- NEP-CBA-2007-04-09 (Central Banking)
- NEP-MAC-2007-04-09 (Macroeconomics)
- NEP-MON-2007-04-09 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cabrero, Alberto & Camba-Méndez, Gonzalo & Hirsch, Astrid & Nieto, Fernando, 2002. "Modelling the daily banknotes in circulation in the context of the liquidity management of the European Central Bank," Working Paper Series 0142, European Central Bank.
- Dieter Nautz & Jörg Oechssler, 2003.
"The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 105(2), pages 207-220, 06.
- Nautz, Dieter & Oechssler, Jörg, 1999. "The repo auctions of the European Central Bank and the vanishing quota puzzle," SFB 373 Discussion Papers 1999,79, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Dieter Nautz & Jörg Oechssler, 2001. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Bonn Econ Discussion Papers bgse9_2001, University of Bonn, Germany.
- Juan Ayuso & Andrew Haldane & Fernando Restoy, 1997. "Volatility transmission along the money market yield curve," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(1), pages 56-75, March.
- Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2005. "Equilibrium and inefficiency in fixed rate tenders," Working Paper Series 0554, European Central Bank.
- Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
- Gaspar, Vítor & Pérez-Quirós, Gabriel & Rodriguez, Hugo, 2004.
"Interest Rate Determination in the Interbank Market,"
CEPR Discussion Papers
4516, C.E.P.R. Discussion Papers.
- Vitor Gaspar & Gabriel Pérez Quir? & Hugo Rodr?uez Mendiz?al, 2004. "Interest Rate Determination in the Interbank Market," UFAE and IAE Working Papers 603.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Gaspar, Vítor & Pérez Quirós, Gabriel & Rodríguez Mendizábal, Hugo, 2004. "Interest rate determination in the interbank market," Working Paper Series 0351, European Central Bank.
- Vítor Gaspar & Gabriel Pérez-Quirós & Hugo Rodríguez Mendizábal, 2004. "Interest rate determination in the interbank market," Banco de Espaï¿½a Working Papers 0407, Banco de Espa�a.
- Kjell G. Nyborg & Ilya A. Strebulaev, 2003.
"Multiple Unit Auctions and Short Squeezes,"
2003.27, Fondazione Eni Enrico Mattei.
- Hartmann, Philipp & Manna, Michele & Manzanares, Andres, 2001.
"The Microstructure of the Euro Money Market,"
CEPR Discussion Papers
3081, C.E.P.R. Discussion Papers.
- Nyborg, Kjell G. & Strebulaev, Ilya A., 2001. "Collateral and short squeezing of liquidity in fixed rate tenders," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 769-792, November.
- Juan Ayuso & Rafael Repullo, 2003.
"A Model of the Open Market Operations of the European Central Bank,"
Royal Economic Society, vol. 113(490), pages 883-902, October.
- Ayuso, J. & Repullo, R., 2000. "A Model of the Open Market Operations of the European Central Bank," Papers 0011, Centro de Estudios Monetarios Y Financieros-.
- Ayuso, Juan & Repullo, Rafael, 2000. "A Model of the Open Market Operations of the European Central Bank," CEPR Discussion Papers 2605, C.E.P.R. Discussion Papers.
- Juan Ayuso & Rafael Repullo, 2000. "A Model of the Open Market Operations of the European Central Bank," Banco de Espaï¿½a Working Papers 0016, Banco de Espa�a.
- Furfine, Craig H., 2000. "Interbank payments and the daily federal funds rate," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 535-553, October.
- Linzert, Tobias & Nautz, Dieter & Bindseil, Ulrich, 2004. "The longer term refinancing operations of the ECB," Working Paper Series 0359, European Central Bank.
- Bindseil, Ulrich & Manzanares, Andrés & Weller, Benedict, 2004. "The role of central bank capital revisited," Working Paper Series 0392, European Central Bank.
- Rudebusch, Glenn D., 2002.
"Term structure evidence on interest rate smoothing and monetary policy inertia,"
Journal of Monetary Economics,
Elsevier, vol. 49(6), pages 1161-1187, September.
- Glenn D. Rudebusch, 2001. "Term structure evidence on interest rate smoothing and monetary policy inertia," Working Paper Series 2001-02, Federal Reserve Bank of San Francisco.
- Ulrich Bindseil, 2005. "Over- and Underbidding in Central Bank Open Market Operations Conducted as Fixed Rate Tender," German Economic Review, Verein für Socialpolitik, vol. 6(1), pages 95-130, 02.
- Alberto Cabrero & Gonzalo Camba-Mendez & Astrid Hirsch & Fernando Nieto, 2002. "Modelling the daily banknotes in circulation in the context of the liquidity management of the European Central Bank," Banco de Espaï¿½a Working Papers 0211, Banco de Espa�a.
- Allen, Linda & Saunders, Anthony, 1992. "Bank window dressing: Theory and evidence," Journal of Banking & Finance, Elsevier, vol. 16(3), pages 585-623, June.
- Daniel L. Thornton, 2001. "Identifying the liquidity effect at the daily frequency," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 59-82.
- Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements.
- Ho, Thomas S Y & Saunders, Anthony, 1985. " A Micro Model of the Federal Funds Market," Journal of Finance, American Finance Association, vol. 40(3), pages 977-88, July.
- Ulrich Bindseil & Benedict Weller & Flemming Wuertz, 2003. "Central Bank and Commercial Banks' Liquidity Management - What is the Relationship?," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 32(1), pages 37-66, 02.
- Välimäki, Tuomas, 2003. "Central bank tenders: three essays on money market liquidity auctions," Scientific Monographs E:26/2003, Bank of Finland.
- Paolo Angelini, 2002.
"Liquidity and Announcement Effects in the Euro Area,"
Temi di discussione (Economic working papers)
451, Bank of Italy, Economic Research and International Relations Area.
- Paolo Angelini, 2008. "Liquidity And Announcement Effects In The Euro Area," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 67(1), pages 1-20, March.
- Nautz, Dieter & Schmidt, Sandra, 2009.
"Monetary policy implementation and the federal funds rate,"
Journal of Banking & Finance,
Elsevier, vol. 33(7), pages 1274-1284, July.
- Nautz, Dieter & Schmidt, Sandra, 2008. "Monetary Policy Implementation and the Federal Funds Rate," ZEW Discussion Papers 08-025, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Runchana Pongsaparn & Panda Ketruangroch & Dhanaporn Hirunwong, 2012. "Monetary Policy conduct in Review: The Appropriate Choice of Instruments," Working Papers 2012-05, Economic Research Department, Bank of Thailand.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stein Fossen).
If references are entirely missing, you can add them using this form.