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During the past three years, central banks have faced challenges that few foresaw during the period known as the Great Moderation. During the crisis, central banks have responded with traditional interest rate tools, been forced to deal with the zero lower bound on nominal interest rates, and expanded the scope of their lender of last resort function. In addition, quantitative easing and credit easing policies have entered the toolkit of central banks. After briefly discussing the instruments of monetary policy and reviewing the performance of inflation targeting, I consider three suggested modifications to this policy framework. These are raising the average target for inflation, incorporating additional objectives, and switching to price level targeting.

Most models of monetary policy specify a single rule (frequently a Taylor rule) for setting a policy interest rate based on monetary aggregates. Here I consider an economy where the government has two channels for injecting or withdrawing money from the economy: a policy of monetary transfers to or taxes from households handled by the fiscal authorities and another for injecting or withdrawing money from the financial system handled by the monetary authorities. Since the two channels produce different responses in the economy, this paper studies how different combinations of these policies with the same aggregate money growth give different macroeconomic results. This is an important issue because central banks are often called upon to use their interest rate channel to sterilize monetary shocks under an at least implicit assumption that this will neutralize the shocks. In addition, by having two types of households, skilled and unskilled, with different savings opportunities, it is possible to study the disparate effects of different mixtures of the two channels on richer and poorer households as well as the effect on aggregate output and inflation. Results are that the utility of the unskilled is higher the higher the transfer rates and that of the skilled is lower. In general, at given transfer rates, the unskilled prefer higher inflation rates and the skilled lower. At higher positive rates of transfer to the unskilled both the unskilled and the skilled prefer higher inflation rates. This suggests that in countries where unskilled are the majority, transfers to the unskilled are likely to be a social choice outcome even at the cost of reduced total output. The paper also points out that concentrating on aggregate output and inflation as policy objectives can be problematic.

After giving an overview of Fijian geography, recent history and latest econmic development, this study deals with a detailed description of the country's financial system and its institutional arrangement. In particular the reader is informed about the Reserve Bank of Fiji, its domestic and international monetary policy anad the country's supply of demand for money. Finally, the author gives some remarks about strategies for the conduct of monetary policy in Fiji. (DÜI-Sbt)

For some time now the buzzword 'transparency' has been bandied about in the media almost daily. For example, calls were made for greater transparency in the financial system in connection with developments in the Asian financial markets. But the call for greater transparency goes far beyond the financial markets. It is now regarded as a necessary part of "good governance" demanded of all economic policy makers. As the World Bank's chief economist Joseph Stiglitz put it: 'No one would dare say that they were against transparency (.): It would be like saying you were against motherhood or apple pie.' This paper focuses on transparency in monetary policy, in particular with respect to the European System of Central Bank.

In this article we propose a policy framework for inflation targeting that contains elements of both optimal and simple rules. We use a simple feedback rule for the interest rate to look after monetary policy in the long run whilst using optimal control in the short run to determine appropriate responses to shocks. The composite policy is capable of substantial welfare improvements over using a simple rule alone whilst maintaining tractability. We see the use of such a framework together with a fully specified model as a feasible approach to practical policy design.

What is the optimal institutional structure for an independent central bank? The paper shows when it will be optimal for a country to have a central bank to be organized according to federal, purely national or a combination of both aspects. The analysis is then extended to a supranational monetary union and it is shown which organizational structure of a common central bank is optimal for participating countries and when they are willing to join. The implications for an enlargement of a monetary union are derived as well.