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Implementing Monetary Policy

Author

Listed:
  • William A Allen

Abstract

The purpose of the paper is to discuss how monetary policy decisions made by the board or monetary policy committee of a central bank can be implemented. It distinguishes between the polar extremes of direct and indirect methods of implementation, and explains why indirect methods are generally preferred. It describes the circumstances in which various elements of a central bank’s balance sheet can grow very quickly, threatening to cause the growth rate of central bank money to rise to levels inconsistent with the objectives of monetary policy, and discusses what offsetting measures the central bank can take to contain the growth of central bank money. It describes in detail how open market operations can be conducted, and discusses techniques of intervention in foreign exchange markets. Finally, it reviews the usefulness of direct controls of instruments of monetary policy, and discusses the conditions in which such controls might be needed and how they can best be designed.

Suggested Citation

  • William A Allen, 2004. "Implementing Monetary Policy," Lectures, Centre for Central Banking Studies, Bank of England, number 4, April.
    • Handle: RePEc:ccb:lectur:4
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    Citations

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    Cited by:

    1. Guender, Alfred V. & Rimer, Oyvinn, 2008. "The implementation of monetary policy in New Zealand: What factors affect the 90-day bank bill rate?," The North American Journal of Economics and Finance, Elsevier, vol. 19(2), pages 215-234, August.
    2. Radu Șimandan & Cristian Păun, 2021. "The Costs and Trade-Offs of Green Central Banking: A Framework for Analysis," Energies, MDPI, vol. 14(16), pages 1-25, August.
    3. Radu Șimandan & Cristian Valeriu Păun & Bogdan Glăvan, 2023. "Post-Pandemic Greenness? How Central Banks Use Narratives to Become Green," Sustainability, MDPI, vol. 15(2), pages 1-28, January.
    4. Faruk Balli & Elsayed Mousa Elsamadisy, 2012. "Modelling the currency in circulation for the State of Qatar," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 5(4), pages 321-339, November.
    5. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.

    More about this item

    Keywords

    Monetary Policy;

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