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Setting Monetary Policy in East Asia: Goals, Developments and Institutions

In: Future Directions for Monetary Policies in East Asia

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  • Robert N McCauley

    (Bank for International Settlements)

Abstract

This paper presents a comprehensive and analytical review of monetary policy-making in the East Asian economies since the 1997 financial crisis. Focusing on the three key issues of objectives, instruments and institutional developments, it surveys the recent choice of monetary policy objectives in East Asia. The paper observes that while most central banks in East Asia are striving for price stability, the openness of their economies compels them to focus on exchange rate. Their strategies, however, vary from using effective exchange rate as an operating target, to adoption of inflation targeting and fixed exchange rate with selective capital controls. On central bank independence, the paper concludes that there is very little support for several propositions linking central bank independence with inflation; and that more attention should be given to the balance-sheet independence of central banks.
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Suggested Citation

  • Robert N McCauley, 2001. "Setting Monetary Policy in East Asia: Goals, Developments and Institutions," RBA Annual Conference Volume (Discontinued), in: David Gruen & John Simon (ed.),Future Directions for Monetary Policies in East Asia, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbaacv:acv2001-02
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    File URL: https://www.rba.gov.au/publications/confs/2001/pdf/mccauley.pdf
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    References listed on IDEAS

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    1. Aaron Drew & L Christopher Plantier, 2000. "Interest rate smoothing in New Zealand and other dollar bloc countries," Reserve Bank of New Zealand Discussion Paper Series DP2000/10, Reserve Bank of New Zealand.
    2. Ben S C Fung & Robert N McCauley, 2001. "Analysing the growth of Taiwanese deposits in foreign currency," BIS Quarterly Review, Bank for International Settlements, September.
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    Cited by:

    1. Siti Hamizah Mohd & Ahmad Zubaidi Baharumshah & Stilianos Fountas, 2013. "Inflation, Inflation Uncertainty And Output Growth: Recent Evidence From Asean-5 Countries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 58(04), pages 1-17.
    2. Kanit Sangsubhan, 2010. "Managing Capital Flows: The Case of Thailand," Chapters, in: Masahiro Kawai & Mario B. Lamberte (ed.), Managing Capital Flows, chapter 15, Edward Elgar Publishing.
    3. corrinne ho & robert n mccauley, 2004. "Living with flexible exchange rates:," International Finance 0411003, University Library of Munich, Germany.
    4. San Sau Fung & Marc Klau & Guonan Ma & Robert N. McCauley, 2006. "Estimation of Asian effective exchange rates: a technical note," BIS Working Papers 217, Bank for International Settlements.
    5. Bennett T. McCallum, 2007. "Monetary Policy in East Asia: The Case of Singapore," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(S1), pages 13-28, December.
    6. Stephen GRENVILLE, 2007. "Regional and Global Responses to the Asian Crisis," Asian Economic Policy Review, Japan Center for Economic Research, vol. 2(1), pages 54-70, June.
    7. Mr. Leslie E Teo & Mr. David Cowen & Mr. Hemant Shah & Mr. Ranil M Salgado & Mr. Alessandro Zanello, 2006. "Financial Integration in Asia: Recent Developments and Next Steps," IMF Working Papers 2006/196, International Monetary Fund.
    8. Bennett T. McCallum, 2014. "Monetary Policy in a Very Open Economy: Some Major Analytical Issues," Pacific Economic Review, Wiley Blackwell, vol. 19(1), pages 27-60, February.
    9. Robert Neil McCauley, 2006. "Understanding monetary policy in Malaysia and Thailand: objectives, instruments and independence," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 172-198, Bank for International Settlements.
    10. Gerlach-Kristen, Petra, 2006. "Internal and external shocks in Hong Kong: Empirical evidence and policy options," Economic Modelling, Elsevier, vol. 23(1), pages 56-75, January.
    11. Thomas D. Willett & Jeff (Yongbok) Kim & Isriya Nitithanprapas Bunyasiri, 2012. "Measuring Exchange Rate Flexiblity: A Two-Parameter Exchange Market Pressure Approach," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-28.
    12. Stefan Gerlach & Petra Gerlach-Kristen, 2006. "Monetary policy regimes and macroeconomic outcomes: Hong Kong and Singapore," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 40-64, Bank for International Settlements.
    13. Akyüz, Yılmaz., 2006. "Issues in macroeconomic and financial policies, stability and growth," ILO Working Papers 993913213402676, International Labour Organization.
    14. Cavoli, Tony, 2008. "The exchange rate and optimal monetary policy rules in open and developing economies: Some simple analytics," Economic Modelling, Elsevier, vol. 25(5), pages 1011-1021, September.
    15. Pontines, Victor & Siregar, Reza, 2009. "Intervention index and exchange rate regimes: the cases of selected East-Asian economies," MPRA Paper 17138, University Library of Munich, Germany.
    16. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
    17. Chen, Xiaofen, 2012. "The dampening effect of bank foreign liabilities on monetary policy: Revisiting monetary cooperation in East Asia," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 412-427.
    18. Kee Kuan Foong, 2010. "Managing Capital Flows: The Case of Malaysia," Chapters, in: Masahiro Kawai & Mario B. Lamberte (ed.), Managing Capital Flows, chapter 12, Edward Elgar Publishing.

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