Monetary policy frameworks from 1999 to 2003: the less it changes the less it stays the same

This paper, prepared as a background chapter for an edited book, considers the changes in monetary policy frameworks (MPFs) over the first quarter of the 21st century. Section 1 presents the overall global and regional trends in monetary policy frameworks from 1999 to 2023. That analysis shows that the distribution of MPFs has changed rather less in recent years. However, the paper then turns to analyse in more detail the important changes within the two most widespread MPFs, inflation targeting and loosely structured discretion, over the period. Section 2 examines the rise in inflation targeting and the changes made within that framework by a number of mainly advanced economies, which have put more emphasis on output and employment but retained the primacy of the quantitative inflation target. Section 3 examines the changes in the monetary policy instruments commonly used within the loosely structured discretion framework, which have involved substantial improvements in effectiveness over time, typically associated with developments in money and bond markets, which facilitate switches to alternative MPFs. Overall, the paper highlights what amounts to a useful refocus from the choice of monetary policy framework to the operation of monetary policy.