Monetary Policy Strategies in the Asia and Pacific Region: What Way Forward?
Monetary policy frameworks in the Asia and Pacific region have performed well in the past decade as judged by inflation outcomes. We argue that this is due to three principal factors: (i) central banks have focused on price stability as the primary objective of monetary policy, (ii) institutional setups have been put in place that are supportive of the central banks' abilities to carry out their objectives, and (iii) economic policies in general have been supportive of the pursuit of price stability, in particular the adoption of prudent fiscal policies that have reduced concerns of fiscal dominance. The financial systems in the region have also held up well in the face of the current crisis, notwithstanding more adverse liquidity conditions in several markets and pressures on certain exchange rates that spilled over from the West. It may nevertheless be useful to ask whether changes in monetary policy frameworks should be contemplated. This paper concludes that: (i) for economies with well developed financial markets, there may be little value in using unconventional monetary policies in the absence of financial crises, because in normal times such policies are not likely to be effective and may further reduce the efficiency of the financial market; (ii) a good case can be made for elevating the role of the misalignment of asset prices (including exchange rates) and financial imbalances in the conduct of monetary policy; and (iii) financial stability should take on greater importance as an objective for public policy. Whether and how much of the financial stability objective should be assigned to the central bank is still an open question.
|Date of creation:||15 Feb 2010|
|Contact details of provider:|| Postal: Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan|
Fax: (81-3) 3593-5571
Web page: http://www.adbi.org/
More information through EDIRC
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.:
- Jerry H Tempelman, 2009. "Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 44(3), pages 182-183, July.
- Alice Y. Ouyang & Ramkishen S. Rajan & Thomas D. Willett, 2007.
"China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients,"
102007, Hong Kong Institute for Monetary Research.
- Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
- Vasco Cúrdia & Michael Woodford, 2009.
"Credit spreads and monetary policy,"
385, Federal Reserve Bank of New York.
- Charles Engel, 2009.
"Exchange rate policies,"
Federal Reserve Bank of Dallas, issue Nov.
- Shiratsuka, Shigenori, 2010.
"Size and composition of the central bank balance sheet: revisiting Japan's experience of the quantitative easing policy,"
Globalization and Monetary Policy Institute Working Paper
42, Federal Reserve Bank of Dallas.
- Shigenori Shiratsuka, 2010. "Size and Composition of the Central Bank Balance Sheet: Revisiting Japan fs Experience of the Quantitative Easing Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 28, pages 79-106, November.
- Shigenori Shiratsuka, 2009. "Size and Composition of the Central Bank Balance Sheet: Revisiting Japan fs Experience of the Quantitative Easing Policy," IMES Discussion Paper Series 09-E-25, Institute for Monetary and Economic Studies, Bank of Japan.
- Morgan, Peter, 2009.
"The Role and Effectiveness of Unconventional Monetary Policy,"
ADBI Working Papers
163, Asian Development Bank Institute.
- Peter J. Morgan, 2012. "The Role and Effectiveness of Unconventional Monetary Policy," Chapters, in: Monetary and Currency Policy Management in Asia, chapter 2 Edward Elgar Publishing.
- Andrew Filardo & Hans Genberg, 2010. "Targeting inflation in Asia and the Pacific: lessons from the recent past," BIS Papers chapters, in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 251-273 Bank for International Settlements.
- Hans Genberg & Dong He, 2007. "Monetary and Financial Cooperation among Central Banks in East Asia and the Pacific," Working Papers 0715, Hong Kong Monetary Authority.
- N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
- Claudio Borio & Piti Disyatat, 2010.
"Unconventional Monetary Policies: An Appraisal,"
University of Manchester, vol. 78(s1), pages 53-89, 09.
- David L. Haugh, 2008. "Monetary Policy under Uncertainty about the Nature of Asset-Price Shocks," International Journal of Central Banking, International Journal of Central Banking, vol. 4(4), pages 39-83, December.
- Hans Genberg, 2008. "The changing nature of financial intermediation and its implications for monetary policy," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial market developments and their implications for monetary policy, volume 39, pages 100-113 Bank for International Settlements.
- White, William R., 2009. "Should monetary policy "lean or clean"?," Globalization and Monetary Policy Institute Working Paper 34, Federal Reserve Bank of Dallas.
- Alan S. Blinder & Ricardo Reis, 2005.
"Understanding the Greenspan standard,"
Proceedings - Economic Policy Symposium - Jackson Hole,
Federal Reserve Bank of Kansas City, issue Aug, pages 11-96.
- David Gruen & Michael Plumb & Andrew Stone, 2003.
"How Should Monetary Policy Respond to Asset-price Bubbles?,"
RBA Research Discussion Papers
rdp2003-11, Reserve Bank of Australia.
- David Gruen & Michael Plumb & Andrew Stone, 2005. "How Should Monetary Policy Respond to Asset-Price Bubbles?," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
- David Gruen & Michael Plumb & Andrew Stone, 2003. "How Should Monetary Policy Respond to Asset-price Bubbles?," RBA Annual Conference Volume, in: Anthony Richards & Tim Robinson (ed.), Asset Prices and Monetary Policy Reserve Bank of Australia.
- Gruen, David & Plumb, Michael & Stone, Andrew, 2005. "How Should Monetary Policy Respond to Asset-Price Bubbles?," MPRA Paper 833, University Library of Munich, Germany.
- Michael B. Devereux & Charles Engel, 2007.
"Expectations and Exchange Rate Policy,"
062007, Hong Kong Institute for Monetary Research.
- William R. White, 2006. "Is price stability enough?," BIS Working Papers 205, Bank for International Settlements.
- Stephen G. Cecchetti & Hans Genberg & Sushil Wadhwani, 2002. "Asset Prices in a Flexible Inflation Targeting Framework," NBER Working Papers 8970, National Bureau of Economic Research, Inc.
- Peter Stella, 2009. "The Federal Reserve System Balance Sheet; What Happened and Why it Matters," IMF Working Papers 09/120, International Monetary Fund.
- Sushil Wadhwani, 2008. "Should Monetary Policy Respond To Asset Price Bubbles? Revisiting the Debate," National Institute Economic Review, National Institute of Economic and Social Research, vol. 206(1), pages 25-34, October.
- Sushil Wadhwani, 2008.
"Should Monetary Policy Respond to Asset Price Bubbles? Revisiting the Debate,"
FMG Special Papers
sp180, Financial Markets Group.
- Sushil Wadhwani, 2008. "Should Monetary Policy respond to Asset Price Bubbles? Revisiting the Debate," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
- Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-398, September.
- Paul A. Volcker, 2002. "Monetary policy transmission: past and future challenges," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 7-11.
- Andrew Filardo, 2004. "Monetary policy and asset price bubbles: calibrating the monetary policy trade-offs," BIS Working Papers 155, Bank for International Settlements.
- Alicia Garcia-Herrero & Eli M. Remolona, 2008. "Managing expectations by words and deeds: Monetary policy in Asia and the Pacific," Working Papers 0802, BBVA Bank, Economic Research Department.
- Claudio Borio & Mathias Drehmann, 2009. "Assessing the risk of banking crises - revisited," BIS Quarterly Review, Bank for International Settlements, March.
- repec:pri:cepsud:114blinderreis is not listed on IDEAS
- Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
- Fry, M.J., 1996. "Governance at the Macro Level: Assessing Central Bank Independence in Pacific Asia and Other Developing Areas," Discussion Papers 96-27, Department of Economics, University of Birmingham.
When requesting a correction, please mention this item's handle: RePEc:ris:adbiwp:0195. 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: (Marc Benger)
If references are entirely missing, you can add them using this form.