A resurgence of interest in the role of banks in the transmission of monetary policy has resulted in a spate of theoretical and empirical studies. These studies have established that, under certain conditions, the traditional transmission mechanism for monetary policy ("the money view") may be augmented through changes in the supply of bank loans ("the lending view"). Because both the money vie...

During the past two decades, maintenance of low inflation, “price stability,” has become the principal focus of central banks around the world. At the same time, the view has emerged that monetary policy is better suited than fiscal policy for short-run stabilization purposes. This paper examines to what extent monetary policy can be directed at both “monetary stabilization,” stabilizing inflat...

For a country that chooses not to "permanently" fix its exchange rate through a currency board, or a common currency, or some kind of dollarization, the only alternative monetary policy that can work well in the long run is one based on the trinity of (i) a flexible exchange rate, (ii) an inflation target, and (iii) a monetary policy rule.' While not often put into this threepart format, the de...

In this paper we study the monetary and fiscal policy making in a monetary union when authorities face asymmetries in the countries constructing this monetary union. We analyze this problem in an asymmetric environment using a two-country theoretical model and by introducing two alternative types of national asymmetries : asymmetric shocks and the asymmetric transmission mechanism. The central ...

A central issue of monetary policy analysis is the specification of monetary policy shocks. In a structural vector autoregressive setting there has been some controversy about which restrictions to use for identifying the shocks because standard theories do not provide enough information to fully identify monetary policy shocks. In fact, to compare different theories it would even be desirable ...

This paper builds a structural VARMA (SVARMA) model for investigating Canadian monetary policy. Despite the support for a VARMA model for monetary policy analysis, the traditional VAR and SVAR models have predominantly been used in the literature mainly due to difficulties associated with the identification and estimation of such a model. Using the scalar component model (SCM) proposed by Athan...

The purpose of the paper is to survey and discuss in‡ation targeting in the context of monetary policy rules. The paper provides a general conceptual discussion of monetary policy rules, attempts to clarify the essential characteristics of in‡ation targeting, compares in‡ation targeting to other monetary policy rules, and draws some conclusions for the monetary policy of the European System of ...

Ten years of inflation targeting in New Zealand is used to test whether monetary policy conforms to the simple rules that have been recommended in the literature. While a Taylor rule with the standard parameters used in the US describes New Zealand monetary policy quite well, the Reserve Bank has focused more strongly on price stability, as required by its Policy Targets Agreements. Monetary po...

1 Do Þnancial markets price monetary policy uncertainty? Abstract We study the impact of the uncertainty about the type of monetary policy on stock returns. We derive a model where we explicitly link fundamental uncertainty and uncertainty about the type of monetary policy and generate testable implications of their relative impacts on asset prices. We argue that investors' learning about the s...

This paper studies the design of monetary policy in a fiscal federation, such as the European Union. The focus of the analysis is the interaction between the fiscal policy of member countries (regions) and the monetary authority. Each of the countries structures its fiscal policy (spending and taxes) with the interests of its citizens in mind. Thus each country perceives a gain to shifting its ...