IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this book chapter

A tale of two perspectives: old or new challenges for monetary policy?

In: Monetary policy in a changing environment

  • Claudio Borio

    (Bank for International Settlements)

  • William English

    (Bank for International Settlements)

  • Andrew Filardo

    (Bank for International Settlements)

This paper reviews the challenges faced by central banks in recent years in order to evaluate their policy implications going forward. To highlight the genuine uncertainty surrounding the lessons to be drawn, the paper examines recent experience through two intentionally polarised perspectives, viz. the "continuity" and "new-environment" views. These perspectives lead to somewhat different conclusions regarding the nature of the challenges central banks are likely to face in the current economic landscape and the policy responses that may be appropriate. While the continuity view stresses the reliability of traditional policy benchmarks, the newenvironment view suggests that it may be worth considering assigning greater weight to the build-up of financial imbalances when calibrating policy. Such an approach could be consistent with current policy frameworks, but it would point to a somewhat longer horizon for evaluating policy alternatives as well as greater attention to the balance of risks to the outlook.

(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.

File URL: http://www.bis.org/publ/bppdf/bispap19a.pdf
Download Restriction: no

as
in new window

This chapter was published in:
  • Bank for International Settlements, 2003. "Monetary policy in a changing environment," BIS Papers, Bank for International Settlements, number 19, March.
  • This item is provided by Bank for International Settlements in its series BIS Papers chapters with number 19-01.
    Handle: RePEc:bis:bisbpc:19-01
    Contact details of provider: Postal:
    Centralbahnplatz 2, CH - 4002 Basel

    Phone: (41) 61 - 280 80 80
    Fax: (41) 61 - 280 91 00
    Web page: http://www.bis.org/
    Email:


    More information through EDIRC

    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.:

    as in new window
    1. Freedman, Charles, 2000. "Comment on Overcoming the Zero Bound on Interest Rate Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 1051-57, November.
    2. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
    3. Charles A.E. Goodhart, 2001. "Monetary transmission lags and the formulation of the policy decision on interest rates," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 165-186.
    4. Sevensson, L.E.O., 1999. "Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability," Papers 673, Stockholm - International Economic Studies.
    5. Karl E. Case & John M. Quigley & Robert J. Shiller, 2001. "Comparing Wealth Effects: The Stock Market versus the Housing Market," Cowles Foundation Discussion Papers 1335, Cowles Foundation for Research in Economics, Yale University.
    6. Gilbert Cette & Christian Pfister, 2004. "Challenges of the “New Economy” for Monetary Policy," International Productivity Monitor, Centre for the Study of Living Standards, vol. 8, pages 27-36, Spring.
    7. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, December.
    8. Hoggarth, Glenn & Reis, Ricardo & Saporta, Victoria, 2002. "Costs of banking system instability: Some empirical evidence," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 825-855, May.
    9. Okina, Kunio & Shiratsuka, Shigenori, 2002. "Asset Price Bubbles, Price Stability, and Monetary Policy: Japan' s Experience," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(3), pages 35-76, October.
    10. John Hawkins & Dubravko Mihaljek, 2001. "The banking industry in the emerging market economies: competition, consolidation and systemic stability: an overview," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking industry in the emerging market economies: competition, consolidation and systemic stability, volume 4, pages 1-44 Bank for International Settlements.
    11. André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2003. "Inflation targeting in Brazil: lessons and challenges," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 106-133 Bank for International Settlements.
    12. Thomas Dalsgaard & Jørgen Elmeskov & Cyn-Young Park, 2002. "Ongoing changes in the business cycle - evidence and causes," SUERF Studies, SUERF - The European Money and Finance Forum, number 20 edited by Morten Balling, November.
    13. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    14. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, May.
    15. C. Goodhart, 2001. "What Weight Should be Given to Asset Prices in the Measurementof Inflation?," DNB Staff Reports (discontinued) 65, Netherlands Central Bank.
    16. Gautam Gowrisankaran & Joanna Stavins, 2002. "Network Externalities and Technology Adoption: Lessons from Electronic Payments," NBER Working Papers 8943, National Bureau of Economic Research, Inc.
    17. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-68, July.
    18. Wicksell, Knut, 1907. "The Influence of the Rate of Interest on Prices," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 17, pages 213-220.
    19. Michael D. Bordo & Olivier Jeanne, 2002. "Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy," NBER Working Papers 8966, National Bureau of Economic Research, Inc.
    20. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    21. Benjamin M. Friedman, 2002. "The Use and Meaning of Words in Central Banking: Inflation Targeting, Credibility, and Transparency," NBER Working Papers 8972, National Bureau of Economic Research, Inc.
    22. Alexei Onatski & James H. Stock, 1999. "Robust monetary policy under model uncertainty in a small model of the U.S. economy," Proceedings, Federal Reserve Bank of San Francisco.
    23. Hanno Lustig & Stijn Van Nieuwerburgh, 2002. "Housing Collateral, Consumption Insurance and Risk Premia," Macroeconomics 0211008, EconWPA.
    24. Robert Amano & Scott Hendry, 2003. "Inflation persistence and costly market share adjustment: a preliminary analysis," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 134-146 Bank for International Settlements.
    25. David Gruen & Tim Robinson & Andrew Stone, 2002. "Output Gaps in Real Time: Are They Reliable Enough to Use for Monetary Policy?," RBA Research Discussion Papers rdp2002-06, Reserve Bank of Australia.
    26. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
    27. Svensson, Lars-E-O, 2001. "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(S1), pages 277-312, February.
    28. Laidler,David, 1999. "Fabricating the Keynesian Revolution," Cambridge Books, Cambridge University Press, number 9780521645966, November.
    29. Marc Klau & John Hawkins, 2000. "Measuring potential vulnerabilities in emerging market economies," BIS Working Papers 91, Bank for International Settlements.
    30. Mark Zelmer & Andrea Schaechter, 2000. "Adopting Inflation Targeting; Practical Issues for Emerging Market Countries," IMF Occasional Papers 202, International Monetary Fund.
    31. Bank for International Settlements, 2001. "Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries," BIS Papers, Bank for International Settlements, number 08, March.
    32. N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 529-538.
    33. Nelson, Edward & Nikolov, Kalin, 2001. "UK Inflation in the 1970s and 1980s: The Role of Output Gap Mismeasurement," CEPR Discussion Papers 2999, C.E.P.R. Discussion Papers.
    34. Barry Eichengreen and Carlos Arteta., 2000. "Banking Crises in Emerging Markets: Presumptions and Evidence," Center for International and Development Economics Research (CIDER) Working Papers C00-115, University of California at Berkeley.
    35. Christian Upper & Andreas Worms, 2003. "Real long-term interest rates and monetary policy: a cross-country perspective," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 234-257 Bank for International Settlements.
    36. Katharine S. Neiss & Edward Nelson, 2001. "The real interest rate gap as an inflation indicator," Bank of England working papers 130, Bank of England.
    37. Bank for International Settlements, 2001. "Empirical studies of structural changes and inflation," BIS Papers, Bank for International Settlements, number 03, March.
    38. Jan Kakes & Cees Ullersma, 2003. "Financial stability in low-inflation environments," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 355-367 Bank for International Settlements.
    39. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    40. Lawrence J. Christiano & Massimo Rostagno, 2001. "Money Growth Monitoring and the Taylor Rule," NBER Working Papers 8539, National Bureau of Economic Research, Inc.
    41. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    42. Mussa, Michael, 2000. "Reflections on Monetary Policy at Low Inflation: Summary Panel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 1100-1106, November.
    43. Goodhart, Charles, 2001. "What Weight Should Be Given to Asset Prices in the Measurement of Inflation?," Economic Journal, Royal Economic Society, vol. 111(472), pages F335-56, June.
    44. Ellen R. McGrattan & Edward C. Prescott, 2001. "The Stock Market Crash of 1929: Irving Fisher Was Right!," NBER Working Papers 8622, National Bureau of Economic Research, Inc.
    45. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
    46. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
    47. Lars Peter Hansen & Thomas J. Sargent, 2001. "Acknowledging Misspecification in Macroeconomic Theory," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 519-535, July.
    48. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, May.
    49. Stefano Scarpetta & Andrea Bassanini & Dirk Pilat & Paul Schreyer, 2000. "Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level," OECD Economics Department Working Papers 248, OECD Publishing.
    50. Patrick Perrier & Robert Amano, 2000. "Credibility and Monetary Policy," Bank of Canada Review, Bank of Canada, vol. 2000(Spring), pages 11-17.
    51. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bis:bisbpc:19-01. 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: (Christian Beslmeisl)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.