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Monetary analysis and the global financial cycle: An Asian central bank perspective

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  • Filardo, Andrew
  • Genberg, Hans
  • Hofmann, Boris

Abstract

Emerging Asia has seen a transformation of its monetary policy environment over the past two decades. By far, the most relevant change has been the maturing of its financial systems and the growing relevance of the global financial cycle: financial inclusion has spread, financial markets have deepened and financial globalisation has linked domestic markets closer to international markets. One consequence of the maturing of the financial systems has been the weakening of the traditional case for the monetarist view of the roles of monetary aggregates in the conduct of monetary policy. In addition, the maturing of the financial systems has elevated concerns of financial stability, as both a source of shocks and a responsibility of central banks. These developments have been further complicated by monetary policy spillovers from the advanced economies. All this points to the need to consider alternatives to conventional inflation targeting frameworks. This paper lays out a policy framework based on a multi-pillar monetary policy approach as a potentially attractive alternative for EM Asia. The three pillars are based on economic, financial and exchange rate stability, respectively. This framework not only offers an alternative conceptual framework but also implies institutional reforms to ensure central banks take a longer term perspective when setting policy.

Suggested Citation

  • Filardo, Andrew & Genberg, Hans & Hofmann, Boris, 2016. "Monetary analysis and the global financial cycle: An Asian central bank perspective," Journal of Asian Economics, Elsevier, vol. 46(C), pages 1-16.
  • Handle: RePEc:eee:asieco:v:46:y:2016:i:c:p:1-16
    DOI: 10.1016/j.asieco.2016.08.002
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    Cited by:

    1. Filardo, Andrew & Genberg, Hans & Hofmann, Boris, 2016. "Monetary analysis and the global financial cycle: An Asian central bank perspective," Journal of Asian Economics, Elsevier, vol. 46(C), pages 1-16.
    2. Floro, Danvee & van Roye, Björn, 2017. "Threshold effects of financial stress on monetary policy rules: A panel data analysis," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 599-620.
    3. Aaron Mehrotra & James Yetman, 2014. "Financial inclusion and optimal monetary policy," BIS Working Papers 476, Bank for International Settlements.
    4. David Cobham, 2015. "Monetary Analysis and Monetary Policy Frameworks: Introduction," Manchester School, University of Manchester, vol. 83, pages 1-4, September.
    5. Shin, H.S. & Turner, P., 2015. "What does the new face of international financial intermediation mean for emerging market economies?," Financial Stability Review, Banque de France, issue 19, pages 25-36, April.
    6. Maurice Obstfeld, 2015. "Trilemmas and Tradeoffs: Living with Financial Globalization," Central Banking, Analysis, and Economic Policies Book Series,in: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed.), Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 2, pages 013-078 Central Bank of Chile.
    7. Jhuvesh Sobrun & Philip Turner, 2015. "Bond markets and monetary policy dilemmas for the emerging markets," BIS Working Papers 508, Bank for International Settlements.
    8. Hans Genberg, "undated". "Global Shocks and Risk to Financial Stability in Asia," Working Papers wp25, South East Asian Central Banks (SEACEN) Research and Training Centre.

    More about this item

    Keywords

    Central bank mandates; Financial cycle; Financial inclusion; Globalisation; Managed exchange rates; Monetary analysis; Monetary policy frameworks; Emerging Asia;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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