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Assets matter: New and old views of monetary policy

Author

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  • Stan du Plessis

    () (Department of Economics, University of Stellenbosch)

Abstract

An extraordinary consensus on the goals and conduct of monetary has been undermined by the international financial crisis and the faltering recovery in many economies. There is an evident need to pay closer attention to developments of asset markets and in the financial sector, which has opened a discussion on the appropriate goals for monetary policy. Meanwhile central banks have employed controversial balance sheet operations to restore market stability and encourage economic recovery. This paper argues that both these developments reflect earlier concerns in monetary policy: prior to the modern consensus both balance sheet policies and an emphasis on financial stability were central concerns of monetary authorities and the future of monetary policy is likely to rhyme with its past.

Suggested Citation

  • Stan du Plessis, 2012. "Assets matter: New and old views of monetary policy," Working Papers 16/2012, Stellenbosch University, Department of Economics.
  • Handle: RePEc:sza:wpaper:wpapers168
    as

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    File URL: https://www.ekon.sun.ac.za/wpapers/2012/wp162012/wp-16-2012.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. Marvin Goodfriend, 2007. "How the World Achieved Consensus on Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 47-68, Fall.
    2. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
    3. Frederic S. Mishkin, 2011. "Monetary Policy Strategy: Lessons from the Crisis," NBER Working Papers 16755, National Bureau of Economic Research, Inc.
    4. Piti Disyatat, 2011. "The Bank Lending Channel Revisited," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 711-734, June.
    5. Goodhart, C.A.E. & Sunirand, P. & Tsomocos, D.P., 2011. "The optimal monetary instrument for prudential purposes," Journal of Financial Stability, Elsevier, vol. 7(2), pages 70-77, June.
    6. William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
    7. Frederic S. Mishkin, 2009. "Monetary Policy Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262513374, January.
    8. Alan Greenspan, 2004. "Risk and Uncertainty in Monetary Policy," American Economic Review, American Economic Association, vol. 94(2), pages 33-40, May.
    9. Charles Goodhart, 2000. "Can Central Banking Survive the IT Revolution?," FMG Special Papers sp125, Financial Markets Group.
    10. Piti Disyatat, 2008. "Monetary policy implementation: Misconceptions and their consequences," BIS Working Papers 269, Bank for International Settlements.
    11. Kenneth J. Arrow & B. Douglas Bernheim & Martin S. Feldstein & Daniel L. McFadden & James M. Poterba & Robert M. Solow, 2011. "100 Years of the American Economic Review : The Top 20 Articles," American Economic Review, American Economic Association, vol. 101(1), pages 1-8, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    monetary policy; interest rate policy; balance sheet operations; financial stability;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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