Monetary Policy Regimes. A Fragile Consensus
The last fifteen years have seen the emergence of widespread consensus that optimum monetary policy is designed on the basis of three pillars: a short-term official rate of interest as the sole policy instrument and the placing of that instrument in the hands of a central bank which is (a) independent of government and (b) transparent in its decision-making. We take a critical look at each of these. In the first case, we focus attention on the failure of mainstream economics to recognise the choice of instrument and the implications of its adoption. In the case of independence we argue that he theoretical case for independence has been misunderstood and that it is not an essential requirement for successful policy. We also show that ‘independence’ is not best measured against a checklist of statutory characteristics. As regards ‘transparency’ our argument is slightly different, though we come to a similar conclusion. Unlike independence, ‘transparency’ does address a real problem for central banks. However, the evidence suggests that transparency is not the only, or even the best, solution. A variety of evidence tells us that agents can understand and anticipate the actions of the most secretive institutions.
(This abstract was borrowed from another version of this item.)
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 35 (2006)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=110909|
References listed on IDEAS
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.:
- Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
- Arestis, Philip & Howells, Peter, 1996. "Theoretical Reflections on Endogenous Money: The Problem with 'Convenience Lending.'," Cambridge Journal of Economics, Oxford University Press, vol. 20(5), pages 539-551, September.
- Eijffinger, Sylvester C.W. & Geraats, Petra M., 2006.
"How transparent are central banks?,"
European Journal of Political Economy,
Elsevier, vol. 22(1), pages 1-21, March.
- Eijffinger, Sylvester C W & Geraats, Petra M, 2002. "How Transparent are Central Banks?," CEPR Discussion Papers 3188, C.E.P.R. Discussion Papers.
- Eijffinger, S.C.W. & Geraats, P., 2006. "How transparent are central banks?," Other publications TiSEM b34dfb1f-520f-4787-a08f-5, Tilburg University, School of Economics and Management.
- Eijffinger, S.C.W. & Geraats, P.M., 2004. "How Transparent Are Central Banks?," Cambridge Working Papers in Economics 0411, Faculty of Economics, University of Cambridge.
- James Forder, 2002. "Interests and 'Independence': The European Central Bank and the theory of bureaucracy," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 51-69.
- Goodhart, Charles A E, 1994. "What Should Central Banks Do? What Should Be Their Macroeconomic Objectives and Operations?," Economic Journal, Royal Economic Society, vol. 104(427), pages 1424-1436, November.
- Giuseppe Fontana & Ezio Venturino, 2003. "Endogenous Money: An Analytical Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 398-416, 09.
- James Forder, 2004. "The theory of credibility: confusions, limitations and dangers," Chapters,in: Neo-Liberal Economic Policy, chapter 2 Edward Elgar Publishing.
- Alvaro Angeriz & Philip Arestis, 2007. "Monetary policy in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 31(6), pages 863-884, November.
- John B. Taylor, 2000. "Teaching Modern Macroeconomics at the Principles Level," American Economic Review, American Economic Association, vol. 90(2), pages 90-94, May.
- Forder, James, 1998. "The case for an independent European central bank: A reassessment of evidence and sources," European Journal of Political Economy, Elsevier, vol. 14(1), pages 53-71, February.
- Stephen G. Cecchetti & Stefan Krause, 2002. "Central bank structure, policy efficiency, and macroeconomic performance: exploring empirical relationships," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 47-60.
- Hayo, Bernd, 1998. "Inflation culture, central bank independence and price stability," European Journal of Political Economy, Elsevier, vol. 14(2), pages 241-263, May.
- Kevin Ross, 2002. "Market Predictability of ECB Policy Decisions; A Comparative Examination," IMF Working Papers 02/233, International Monetary Fund.
- Willem H. Buiter, 1999. "Alice in Euroland," Journal of Common Market Studies, Wiley Blackwell, vol. 37(2), pages 181-209, 06.
- W.H. Buiter, 1999. "Alice in Euroland," CEP Discussion Papers dp0423, Centre for Economic Performance, LSE.
- Willem H. Buiter, 1999. "Alice in Euroland," LSE Research Online Documents on Economics 20226, London School of Economics and Political Science, LSE Library.
- Forder, James, 1998. "Central Bank Independence--Conceptual Clarifications and Interim Assessment," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 307-334, July.
- Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Manchester School, University of Manchester, vol. 71(5), pages 478-497, 09.
- Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Working Papers 2002-028, Federal Reserve Bank of St. Louis.
- James Forder, 2003. "'Independence' and the founding of the Federal Reserve," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 297-310, 08.
- Allsop, Christopher & Vines, David, 2000. "The Assessment: Macroeconomic Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 1-32, Winter. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:mes:ijpoec:v:35:y:2006:i:1:p:62-83. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Nguyen)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.