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"An up-to-date analysis of monetary policy, with a particular focus on the United Kingdom. The book considers questions about how it actually works in practice, and what it should do. It also considers many of the contributions made by economists, both theoretical and empirical, which shed light on monetary policy. One of the aims of the book is to impart this knowledge in an intelligible way to those with a reasonable grasp of basic economics"--

How many people should decide about monetary policy? In this paper, we take an empirical perspective on this issue, analyzing the relationship between the number of monetary policy decision-makers and monetary policy outcomes. Using a new data set that characterizes Monetary Policy Committees (MPCs) in more than 30 countries from 1960 through 2000, we find a U-shaped relation between the membership size of MPCs and inflation; our results suggest that the lowest level of inflation is reached at MPCs with about seven to ten members. Similar results are obtained for other measures, such as inflation variability and output growth. We also find that MPC size influences the success of monetary targeting regimes. In contrast, there is no evidence that either turnover rates of MPC members or the membership composition of MPCs affect economic outcomes.

Since the early 1990s, the IMF has been advising countries to shift to the use of indirect instruments for executing monetary policy. This paper provides information about a monetary policy instruments database, maintained by the Monetary and Capital Markets Department of the IMF. We offer an overview of the information contained in the database in the form of comparative summary tables and graphs to illustrate the use of monetary policy instruments by groups of countries (developing, emerging market and developed countries). The main trend that can be identified from the database information

There has been a remarkable rise in the transparency of monetary policy during the last two decades. This paper provides an overview of the ways in which central banks have been providing more information about their monetary policymaking. Furthermore, it reviews the theoretical literature on monetary policy transparency and relevant empirical findings. The focus is on understanding two key developments, the notable increase in openness about macroeconomic prospects and the recent advance of forward policy guidance.

Central banks have already started to look at climate-related risks in the context of financial stability. Should they also take the carbon intensity of assets into account in the context of monetary policy? The guiding principle in the implementation of monetary policy has been 'market neutrality', whereby the central bank buys a proportion of the market portfolio of available corporate and bank bonds (in addition to government bonds). But this implies a carbon bias, because capital-intensive companies tend to be more carbon intensive. We first review the legal mandate of the Eurosystem. While the primary objective is price stability, the Treaty on European Union allows the greening of monetary policy as a secondary objective. We propose a tilting approach to steer or tilt the allocation of the Eurosystem's assets and collateral towards low-carbon sectors, which would reduce the cost of capital for these sectors relative to high-carbon sectors. This allocation policy must be designed so it does not affect the effective implementation of monetary policy. The working of the tilting approach is calibrated with data on European corporate and bank bonds. We find that a modest tilting approach could reduce carbon emissions in the corporate and bank bond portfolio by 44 per cent and lower the cost of capital of low carbon companies by 4 basis points. Our findings also suggest that such a low carbon allocation can be done without undue interference with the transmission mechanism of monetary policy. Price stability, the primary objective, is, and should remain, the priority of the Eurosystem.

Central banks and prudential supervisory authorities (where different) have already started to look at climate related risks at the financial stability side. Should they also take carbon intensity of assets into account at the monetary policy side? So far, the guiding principle has been 'market neutrality' in the implementation of monetary policy. However, the market has a carbon bias, as capital-intensive companies are more carbon intensive. This paper, first, examines the legal mandate. The secondary objective of the Eurosystem is to support the general economic policies in the European Union, which include sustainable development and a high level of protection and improvement of the quality of the environment. Next, the paper explores how the Eurosystem could steer their asset and collateral policy towards low carbon assets and thus support the greening of the economy. Our initial findings suggest that such a low carbon allocation can be done without interference with the transmission mechanism of monetary policy. Price stability, the primary objective, is, and should remain, the priority of the Eurosystem.

Extending the approach of Bernanke and Blinder (1992), Strongin (1992), and Christiano, Eichenbaum, and Evans (1994a, 1994b), we develop and apply a VAR-based methodology for measuring the stance of monetary policy. More specifically, we develop a semi-structural VAR approach, which extracts information about monetary policy from data on bank reserves and the federal funds rate but leaves the relationships among the macroeconomic variables in the system unrestricted. The methodology nests earlier VAR-based measures and can be used to compare and evaluate these indicators. It can also be used to construct measures of the stance of policy that optimally incorporate estimates of the Fed's operating procedure for any given period. Among existing approaches, we find that innovations to the federal funds rate (Bernanke-Blinder) are a good measure of policy innovations during the periods 1965-79 and 1988-94; for the period 1979-94 as a whole, innovations to the component of nonborrowed reserves that is orthogonal to total reserves (Strongin) seems to be the best choice. We develop a new measure of policy stance that conforms well to qualitative indicators of policy such as the Boschen-Mills (1991) index. Innovations to our measure lead to reasonable and precisely estimated dynamic responses by variables such as real GDP and the GDP deflator. ; In Erweiterung der Beiträge von Bernanke und Blinder (1992), Strongin (1992) und Christiano, Eichenbaum und Evans (1994a, 1994b) stellen wir eine VAR-Methode zur Messung des jeweils vorherrschenden geldpolitischen Ansatzes vor. Wir entwickeln eine semi-strukturelle VAR, die aus Daten über Bankreserven und die Federal Funds Rate Informationen über die Geldpolitik extrahiert, aber die Beziehungen zwischen den makroökonomischen Variablen im System unrestringiert läßt. Die Methode integriert frühere VAR-gestützte Ansätze und kann verwendet werden, um diese Indikatoren zu vergleichen und zu bewerten. Sie eignet sich auch zur Konstruktion von Maßen über den Stand der Geldpolitik, welche die Schätzungen für die Zentralbankoperationen in jeder Periode in optimaler Weise berücksichtigt. Wir finden, daß unter den existierenden Ansätzen auf die Federal Funds Rate wirkende Schocks (Bernanke-Blinder) ein gutes Maß für die Politikinnovationen in den Perioden 1965-79 und 1988-94 darstellen. Für die gesamte Periode 1979-94 scheinen Schocks auf die Komponente der frei verfügbaren Reserven, die orthogonal zu den Gesamtreserven sind (Strongin), die beste Wahl zu sein. Wir entwickeln eine neues Maß für den Stand der Geldpolitik, welches gut mit qualitativen Indikatoren wie dem Boschen-Mills-Index (1991) übereinstimmt. Schocks auf unser Maß führen zu vernünftigen und präzis geschätzten dynamischen Reaktionen von Variablen wie reales GDP und GDP Deflator.

China's economic development has been exceptionally robust since the end of the 1970s, and the country has already emerged as the second biggest economy in the world. In this study, we seek to illuminate the role of the monetary policy in this successful economic performance and as a part of the extensive economic reforms of the last two decades. The five empirical essays seek to discover which monetary policy tools are the most used and most effective for guiding China's economic development. In addition, we explore which monetary policy transmission channels are functioning and to what extent monetary policy impacts inflation and real economic developments in China. The results indicate that the conduct of monetary policy in China differs substantially from what is typical for an advanced market economy, where an independent central bank often aims to hit an inflation target by simply controlling the target interest rate. First, China's monetary policy toolkit is highly diverse. Besides a collection of administrated interest rates, it contains quantitative policy tools and direct guidelines. Second, China's central bank is not independent in its decision-making. For these reasons, it is exceptionally challenging to measure the monetary policy stance or to distinguish monetary policy from other macroeconomic policies in China's case. This has been taken into account in this study by using a variety of monetary-policy indicators. Our results suggest that China's monetary-policy implementation and its transmission to the real economy still rely heavily on quantitative policy tools and direct guidelines; interest rates play a much smaller role, in terms of both usage and effectiveness. Overall, our findings suggest that the direct link between monetary policy and real economic performance is weak in China. On the other hand, this study clearly shows that monetary policy has played a key role in price developments, which tells us that monetary policy has been an important factor in China's economic success.