Monetary Policy Regimes: a fragile consensus
The last fifteen years have seen the emergence of widespread consensus that optimum monetary policy is designed on the basis of three pillars: a short-term official rate of interest as the sole policy instrument and the placing of that instrument in the hands of a central bank which is (a) independent of government and (b) transparent in its decision-making. We take a critical look at each of these. In the first case, we focus attention on the failure of mainstream economics to recognise the choice of instrument and the implications of its adoption. In the case of independence we argue that he theoretical case for independence has been misunderstood and that it is not an essential requirement for successful policy. We also show that ‘independence’ is not best measured against a checklist of statutory characteristics. As regards ‘transparency’ our argument is slightly different, though we come to a similar conclusion. Unlike independence, ‘transparency’ does address a real problem for central banks. However, the evidence suggests that transparency is not the only, or even the best, solution. A variety of evidence tells us that agents can understand and anticipate the actions of the most secretive institutions.
|Date of creation:||Dec 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 0117 328 3610
Web page: http://www1.uwe.ac.uk/bl/research/bristoleconomics.aspx
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.:
- Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
- John B. Taylor, 2000. "Teaching Modern Macroeconomics at the Principles Level," American Economic Review, American Economic Association, vol. 90(2), pages 90-94, May.
- Eijffinger, Sylvester C.W. & Geraats, Petra M., 2006.
"How transparent are central banks?,"
European Journal of Political Economy,
Elsevier, vol. 22(1), pages 1-21, March.
- Eijffinger, S.C.W. & Geraats, P., 2006. "How transparent are central banks?," Other publications TiSEM b34dfb1f-520f-4787-a08f-5, Tilburg University, School of Economics and Management.
- Eijffinger, S.C.W. & Geraats, P.M., 2004. "How Transparent Are Central Banks?," Cambridge Working Papers in Economics 0411, Faculty of Economics, University of Cambridge.
- Eijffinger, Sylvester C W & Geraats, Petra M, 2002. "How Transparent are Central Banks?," CEPR Discussion Papers 3188, C.E.P.R. Discussion Papers.
- James Forder, 2002. "Interests and 'Independence': The European Central Bank and the theory of bureaucracy," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 51-69.
- Hayo, Bernd, 1998. "Inflation culture, central bank independence and price stability," European Journal of Political Economy, Elsevier, vol. 14(2), pages 241-263, May.
- repec:ner:tilbur:urn:nbn:nl:ui:12-88701 is not listed on IDEAS
- Goodhart, Charles A E, 1994. "What Should Central Banks Do? What Should Be Their Macroeconomic Objectives and Operations?," Economic Journal, Royal Economic Society, vol. 104(427), pages 1424-36, November.
- Forder, James, 1998. "The case for an independent European central bank: A reassessment of evidence and sources," European Journal of Political Economy, Elsevier, vol. 14(1), pages 53-71, February.
- Arestis, Philip & Howells, Peter, 1996. "Theoretical Reflections on Endogenous Money: The Problem with 'Convenience Lending.'," Cambridge Journal of Economics, Oxford University Press, vol. 20(5), pages 539-51, September.
- Kevin Ross, 2002. "Market Predictability of ECB Monetary Policy Decisions; A Comparative Examination," IMF Working Papers 02/233, International Monetary Fund.
- Allsop, Christopher & Vines, David, 2000. "The Assessment: Macroeconomic Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 1-32, Winter.
- W.H. Buiter, 1999.
"Alice in Euroland,"
CEP Discussion Papers
dp0423, Centre for Economic Performance, LSE.
- James Forder, 2003. "'Independence' and the founding of the Federal Reserve," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 297-310, 08.
- Forder, James, 1998. "Central Bank Independence--Conceptual Clarifications and Interim Assessment," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 307-34, July.
- Daniel L. Thornton, 2003.
"Monetary policy transparency: transparent about what?,"
University of Manchester, vol. 71(5), pages 478-497, 09.
- Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Working Papers 2002-028, Federal Reserve Bank of St. Louis.
- Alvaro Angeriz & Philip Arestis, 2007. "Monetary policy in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 31(6), pages 863-884, November.
- Giuseppe Fontana & Ezio Venturino, 2003. "Endogenous Money: An Analytical Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 398-416, 09.
- Stephen G. Cecchetti & Stefan Krause, 2002. "Central bank structure, policy efficiency, and macroeconomic performance: exploring empirical relationships," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 47-60.
When requesting a correction, please mention this item's handle: RePEc:uwe:wpaper:0512. 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: (Felix Ritchie)
If references are entirely missing, you can add them using this form.