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What Monetary Policy Operational Frameworks in the New Financial Environment? A Comparison of the US Fed and the Eurosystem Perspectives, 2007–2019

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  • Vincent Grossmann-Wirth

Abstract

While it is too early to draw any firm conclusions regarding the optimal design of long-term monetary policy operational frameworks, the decision taken by the US Fed in January 2019 to continue operating with ample reserves in a so-called floor(s) system, rather than returning to a pre-crisis-type corridor, provides an interesting case study. Our take-away from comparing the Fed’s and the Eurosystem’s perspectives is that, in some contrast to the apparent simplicity of a floor system, both configurations actually require a close monitoring of the money market, some balance-sheet actions and unavoidable policy choices, in particular regarding the elasticity of liquidity provision.

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  • Vincent Grossmann-Wirth, 2019. "What Monetary Policy Operational Frameworks in the New Financial Environment? A Comparison of the US Fed and the Eurosystem Perspectives, 2007–2019," International Journal of Political Economy, Taylor & Francis Journals, vol. 48(4), pages 336-352, October.
    • Handle: RePEc:mes:ijpoec:v:48:y:2019:i:4:p:336-352
    DOI: 10.1080/08911916.2019.1693162
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    Cited by:

    1. Aberg, Pontus & Corsi, Marco & Grossmann-Wirth, Vincent & Hudepohl, Tom & Mudde, Yvo & Rosolin, Tiziana & Schobert, Franziska, 2021. "Demand for central bank reserves and monetary policy implementation frameworks: the case of the Eurosystem," Occasional Paper Series 282, European Central Bank.

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