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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.

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.

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. The author first reviews 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. He proposes 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.

With the final phase of the European Monetary Union underway, concern has been raised over the regional implications of the European Central Bank (ECB) Monetary Policy. Departing from the standard approach utilized by the ECB, this book provides a comprehensive theoretical framework to explore the ways through which money and monetary policy may affect regions. Carlos Rodriguez Fuentes, the rising star of Spanish economics, has produced a work of impressive clarity which analyzes the effects of regional monetary policy - with particular reference to European Monetary Union. Here, he examines the role that the banking system and the liquidity preference of economic agents play in the transmission of central banks monetary policy decisions to regions within a country or countries within a currency union. Rodriguez Fuentes utilizes a unique framework built upon the basic principle of the Post-Keynsian monetary theory which enables the identification of a new way for money and monetary policy to have a regional impact; the behavioural effect. This book, with it's combination of literary and empirical approach will prove essential reading for all students of economics and politics, as well as readers who interested in the development of the European Union.

With the final phase of the European Monetary Union underway, concern has been raised over the regional implications of the European Central Bank (ECB) Monetary Policy. Departing from the standard approach utilized by the ECB, this book provides a comprehensive theoretical framework to explore the ways through which money and monetary policy may affect regions. Carlos Rodriguez Fuentes, the rising star of Spanish economics, has produced a work of impressive clarity which analyzes the effects of regional monetary policy - with particular reference to European Monetary Union. Here, he examines the role that the banking system and the liquidity preference of economic agents play in the transmission of central banks monetary policy decisions to regions within a country or countries within a currency union. Rodriguez Fuentes utilizes a unique framework built upon the basic principle of the Post-Keynsian monetary theory which enables the identification of a new way for money and monetary policy to have a regional impact; the behavioural effect. This book, with it's combination of literary and empirical approach will prove essential reading for all students of economics and politics, as well as readers who interested in the development of the European Union.

Evaluating inflation-targeting monetary policy is more complicated than checking whether inflation has been on target, because inflation control is imperfect and flexible inflation targeting means that deviations from target may be deliberate in order to stabilize the real economy. A modified Taylor curve, the forecast Taylor curve, showing the tradeoff between the variability of the inflation-gap and output-gap forecasts can be used to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time. In particular, by plotting mean squared gaps of inflation and output-gap forecasts for alternative policy-rate paths, it may be examined whether policy has achieved an efficient stabilization of both inflation and the real economy and what relative weight on the stability of inflation and the real economy has effectively been applied. Ex ante evaluation may be more relevant than evaluation ex post, after the fact. Publication of the interest-rate path also allows the evaluation of its credibility and the effectiveness of the implementation of monetary policy.

We develop a macroeconomic framework where money issupplied against only few eligible securities in open marketoperations. The relationship between the policy rate,expected inflation and consumption growth is affected bymoney market conditions, i.e. the varying liquidity value ofeligible assets and the associated risk. This induces a liquiditypremium, which explains the observed systematic wedgebetween the policy rate and consumption Euler interest ratethat standard models equate. It further implies a dampenedresponse of consumption to policy rate shocks that is humpshapedwhen we account for realistic central bank transfersand the dynamics of bond holdings.

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.

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.

Transparency has become a prominent feature of monetary policy. This paper provides an overview of central bank communication practices and is the first to systematically analyze transparency trends throughout the world and across monetary policy frameworks. It shows that increases in information disclosure have not been confined to inflation targeting but extend to other monetary policy frameworks, although there are significant differences. In addition, countries with higher inflation and economic development have undergone larger increases in transparency. Moreover, it shows that greater transparency has been followed by lower average inflation.

This paper analyses the implications of cost-push shocks for the optimal choice of monetary policy target in an two-country sticky-price model. In addition to cost-push shocks, each country is subject to labour-supply and money-demand shocks. It is shown that the fully optimal coordinated policy can be supported by independent national monetary authorities following a policy of flexible inflation targeting. A number of simple (but non-optimal) targeting rules are compared. Strict producer-price targeting is found to be the best simple rule when the variance of cost-push shocks is small. Strict consumerprice targeting is best for intermediate levels of the variance of cost-push shocks. And nominal-income targeting is best when the variance of cost-push shocks in high. In general, money-supply targeting and fixed nominal exchange rates are found to yield less welfare than these other regimes. ; Dieses Papier analysiert die Implikationen eines Cost-Push-Schocks für die optimale Wahl eines Zieles für die Geldpolitik in einem 2-Länder-Modell mit träger Preisanpassung. Neben einem Cost-Push-Schock erlebt jedes Land auch Arbeitsangebots- und Geldnachfrageschocks. Man kann sagen, dass die optimale koordinierte Politik durch unabhängige nationale Zentralbanken verwirklicht werden kann, die eine Strategie des flexiblen Inflation Targeting verfolgen. Eine Reihe einfacher (aber nicht optimaler) geldpolitischer Regeln wird verglichen. Eine Politik, bei der Ziele für die Produzentenpreise angestrebt werden, erweist sich als die beste einfache Regel, wenn die Varianz der Cost-Push-Schocks klein ist. Ziele für Konsumentenpreise sind am besten geeignet bei Cost-Push-Schocks mittlerer Stärke. Ziele für das Nominaleinkommen sind vorzuziehen, wenn die Varianz der Cost-Push-Schocks hoch ist. Im Allgemeinen sind in dem Modell Geldmengenziele oder eine Politik fester Wechselkurse wohlfahrtsökonomisch diesen genannten Regimen unterlegen.