International Monetary and Financial Arrangements: Present and Future

The paper deals with a broad range of topics under the rubric of the international monetary system: exchange rate agreements, International Monetary Fund structure, history and functioning of the European Monetary Union, monetary and fiscal policies adopted in recent years by different countries, with a special emphasis on central bank independence and inflation control, capital flows and cross-border assets growth and their influence on financial stability, and policy proposals to enhance financial stability. With more than four-fifths of world trade conducted under managed or full flexibility the present system can be regarded more as a flexible than a fixed exchange rate regime. EMU is a major institutional innovation; while its economic benefits have been amply discussed and perhaps exaggerated, the economic costs seem to have been underestimated. Financial liberalization has resulted in huge benefits to savers and borrowers as capital has tended to flow to its most productive uses around the world, but it has also led to fears that this has sharply reduced the effectiveness of monetary policy. This liberalization imposes a constraint on monetary policy in the sense that it forces a much higher degree of economic convergence than was true before.     

通胀预期管理下中央银行沟通的有效性研究——基于中国2003～2010年数据的实证分析

有效管理通货膨胀预期已成为中央银行货币政策调控的重要任务之一。近几年,世界上很多国家通过实施中央银行沟通引导市场预期,实现有效的货币政策调控。本文通过考察通货膨胀预期和中央银行沟通及其他经济变量之间的相关关系,分析中央银行沟通能否有效引导市场通胀预期。结果显示,由于缺乏系统性,中央银行沟通对市场预期的引导作用仍不如其他经济变量,但国内中央银行沟通对市场通胀预期的影响是显著的。其中,相对书面沟通,口头沟通对通胀预期的影响更为显著。在目前较强的通胀预期背景下,系统实施中央银行沟通将对未来通胀预期的管理起到积极作用。     

地方政府赤字财政下的物价控制与货币政策选择

货币经济学的一个基本观点就是,紧缩的货币政策能够降低通货膨胀,而扩张性的货币政策能够导致通货膨胀。费德斯坦指出,没有充分考虑财政政策的影响,这是货币经济学的严重缺陷。因此,文章结合我国当前的财政政策,探讨了在地方政府赤字财政下,中央银行如何控制和治理通货膨胀。文章认为,在地方政府赤字财政下,如果政府通过银行融资具有优先权的话,紧缩的货币政策不仅不能够控制通货膨胀,反而加速了通货膨胀。     

Controlling inflation in transition economies: The relevance of central bank independence and the right nominal anchor

Controlling inflation is a central problem in transition economies. This paper asks under what conditions or even whether central bank independence helps in this task. The conclusion shows that merely imposing legal independence on the central bank may be ineffective or even counterproductive. It is necessary to make a monetary strategy and the responsibilities and restrictions of central bank policy transparent to the public. In addition, it is important that the right nominal anchor is selected—one that is, or is believed to be, effective and sustainable. Both monetary targeting and inflation targeting are assumed to be unsuitable for most transition countries. Instead, some kind of dynamic exchange rate targeting appears to be the most reasonable choice.     

COPING WITH INFLATION AND EXCHANGE RATE SHOCKS IN THE SOUTH AFRICAN ECONOMY

Over the past ten years South Africa has moved to an increasingly open economy, characterised by a (relatively) low inflation and large and unpredictable movements in the prices of financial assets. One of these asset prices is the value of the South African currency. This volatility in the exchange rate has a direct impact on inflation. Using the interest rate as operational target, a central bank might ignore or underestimate the exchange rate transmission mechanism through which the economy is influenced. This paper proposes a Monetary Conditions Index for South Africa that can be used as a policy rule or simply as an important information variable in conducting monetary policy under an inflation‐targeting regime with a volatile exchange rate.     

央行利率政策的门限转换特征及国际证据

本文利用亚太地区15个国家1992~2007年的面板数据研究了央行利率政策的门限转换特征。结论认为,通货膨胀对经济增长的影响存在显著的门限特征,各国央行的利率政策也存在显著的门限转换特征。在低通胀阶段,利率没有对经济增长与通货膨胀做出显著响应;但在高通胀阶段,央行首先致力于维护金融稳定,然后促进经济增长。文章对发达国家与发展中国家进行了比较,发现二者的利率政策表现出相似的特征,但发展中国家的利率政策倾向于更高的门限值;文章最后对中国利率政策的实施提出了相关政策建议。     

中国货币政策的福利损失与政策规则选择——基于新凯恩斯DSGE模型的分析

本文在新凯恩斯主义DSGE模型框架下,运用福利损失函数和脉冲响应方法研究我国最优货币政策规则选择的问题。研究结果表明,货币供应量规则相对于利率规则,使外生冲击对产出和通货膨胀的影响更持久,造成更大的福利损失,因此中央银行的货币政策规则应该逐步从货币供应量规则转向利率规则;在一定条件下,前瞻型利率规则、后顾型利率规则和泰勒规则所造成的福利损失相差不大,从便利的角度出发,中央银行应该选择后顾型利率规则。     

Revisiting the Exchange Rate Pass‐Through to Inflation in Africa’s Two Largest Economies: Nigeria and South Africa

This paper revisits the exchange rate pass‐through (ERPT) to inflation in Nigeria and South Africa by incorporating structural breaks and using time series variables, namely the consumer price index, nominal effective exchange rate, gross domestic product, and crude oil price. Based on the Maki cointegration test and a flexible estimation approach of the Autoregressive Distributed Lag (ARDL) model, our empirical evidence suggests that the long‐ and short‐run ERPT to inflation is complete for Nigeria, while for South Africa it is incomplete both in the long run and short run. This result indicates that prices are stickier in South Africa compared to Nigeria. The comparison between Nigeria and South Africa confirms the role of inflation targeting and central bank credibility on the ERPT. The results divulge further that output growth in Nigeria increases inflation in the long run while it is anti‐inflationary in the short run. For South Africa, the effect of output growth is negatively insignificant. In addition, the long‐run effect of oil price is negative and significant for Nigeria, while for South Africa the short‐run effect of oil price is positive and significant. Therefore, the findings of this paper will assist the monetary authorities to achieve monetary policy objectives.     

Assessing the performance of inflation targeting in East Asian economies

This paper examines the implementation and performance of inflation targeting (IT) in four East Asian emerging market economies: Indonesia, Korea, the Philippines, and Thailand. It also examines monetary policy in Malaysia, a country that has not adopted IT. The study estimates policy reaction functions to test the links between the adoption of IT and use of a monetary policy rule. The impulse responses of prices to a monetary policy shock are also estimated to identify monetary policy impacts on prices. The findings on the monetary policies of the five economies can be summarised as follows. Korea has taken an inflation‐responsive and forward‐looking policy stance under inflation targeting, which has had an effect on the stability of prices. Indonesia and Thailand have conducted inflation‐responsive but backward‐looking policy stances, which have had no impact in terms of price stabilisation. The Philippines (which adopted IT but under a pegged exchange rate regime) and Malaysia have neither followed inflation‐responsive rules nor had policy impacts in terms of controlling inflation.     

What to Aim for? The Choice of an Inflation Objective when Openness Matters

Inflation targeting countries generally define the inflation objective in terms of the consumer price index. Studies in the academic literature, however, reach conflicting conclusions concerning which measure of inflation a central bank should target in a small open economy. This paper examines the properties of domestic, CPI, and real-exchange-rate-adjusted (REX) inflation targeting. In one class of open economy New Keynesian models there is an isomorphism between optimal policy in an open versus closed economy. In the type of model we consider, where the real exchange rate appears in the Phillips curve, this isomorphism breaks down; openness matters. REX inflation targeting restores the isomorphism but this may not be desirable. Instead, under domestic and CPI inflation targeting the exchange rate channel can be exploited to enhance the effects of monetary policy. Our results indicate that CPI inflation targeting delivers price stability across the three inflation objectives and will be desirable to a central bank with a high aversion to inflation instability. CPI inflation targeting also does a better job of stabilizing the real exchange rate and interest rate which is an advantage from the standpoint of financial stability. REX inflation targeting does well in achieving output stability and has an advantage if demand shocks are predominant. In general, the choice of the inflation objective affects the trade-offs between policy goals and thus policy choices and outcomes.     

Monetary Policy Implementation and Volatility Transmission Along the Yield Curve: The Case of Kenya

This paper analyses the degree to which volatility in interbank interest rates leads to volatility in financial instruments with longer maturities (e.g. T‐bills) in Kenya since 2012, year in which the monetary policy framework switched to a forward‐looking approach, relative to seven other inflation targeting (IT) countries (Ghana, Hungary, Poland, South Africa, Sweden, Thailand and Uganda). Kenya shows strong volatility transmission and high persistence similar to other countries in transition to a more forwardlooking monetary policy framework. These results emphasize the importance of a strong commitment to an interbank rate as an operational target and suggest that the central bank could reduce uncertainty in short‐term yields significantly by smoothing out the overnight interest rates around the policy rate.     

Inflation targeting in India: A comparison with the multiple indicator approach

The empirical literature on identification and measurement of the impact of monetary policy shocks on the real side of the economy is fairly comprehensive for developed economies, but very limited for emerging and transition economies. In this study, we propose an identification scheme for a developing economy (taking India as a case study), which is able to capture the monetary transmission mechanism for that economy without giving rise to empirical anomalies. Using a VAR approach with recursive contemporaneous restrictions, we identify monetary policy shocks by modelling the reaction function of the central bank and structure of that economy. The effect of monetary policy shocks on the exchange rate and other macroeconomic variables is consistent with the predictions of a broad set of theoretical models. This set-up is used to build a hypothetical case of inflation targeting where the monetary policy instrument is set after assessing the current values of inflation only. This is in contrast with the ‘multiple indicator approach’ currently followed by the Reserve Bank of India (RBI). The results in this study suggest that the demand effects of interest rate are stronger than the exchange rate effects. There is also evidence of the mitigation of potential conflict between exchange rate and interest rate, one of main monetary policy dilemmas of the RBI in inflation targeting.     

Post-crisis monetary and exchange rate policies in Indonesia,Malaysia and Thailands

This paper surveys the post-crisis monetary and exchange rate policies of Indonesia, Thailand and Malaysia. Malaysia has pegged the ringgit while Indonesia and Thailand have adopted heavily managed exchange rates. Under their IMF programs, Thailand and Indonesia set base money targets, but Thailand has moved, and Indonesia is now moving, to inflation targeting, using interest rates as the short-term instrument. Malaysia also sets interest rates. The ability of the three central banks to set interest rates and also pursue an exchange rate target with an interest rate target has been bolstered by restrictions on the internationalisation of the domestic currency. The three central banks have also had to sterilise the monetary effects of their foreign exchange interventions. It is argued that inflation targeting is now a good policy choice, but that a more freely floating exchange rate would be better than sterilisation of balance of payments surpluses or deficits.     

Estimating forward-looking rules for China's Monetary Policy: A regime-switching perspective

This paper introduces a regime-switching forward-looking Taylor rule to describe the monetary policy behavior and considers its estimation using a two-step MLE procedure due to Kim and Nelson (2006), Kim (2009) and Zheng and Wang (2010). By doing an empirical analysis on quarterly data for China over the period 1992–2010, our results show that the actual reactions of China's monetary policy can be well characterized by a two-regime forward-looking Taylor rule. Furthermore, it is also suggested that the interest rate policy in response to inflation and output gap is asymmetric, behaving a significant characteristic of regime-switching nonlinearity. Specifically, in the first regime the People's Bank of China targets inflation, but not focuses on the output gap; while in the second regime the central bank targets the output gap and the policy rule is not a stable framework.     

Worldwide Inflation and International Monetary Reform： Exchange Rates or Interest Rates？

The international dollar standard is malfunctioning. Near‐zero US short‐term interest rates launch massive hot money outflows into emerging markets (EM) in Asia and Latin America. Each EM central bank buys dollars to prevent its currency from appreciating but loses monetary control. Despite some appreciation, average inflation in EMs is now much higher than in the old industrial economies and world commodity prices are bid up sharply. This inflation on the dollar's periphery only registers in the US CPI with a long lag. However, the more immediate effect of the Fed's zero interest rate is to upset the process of bank intermediation within the American economy. Bank credit continues to decline while employment languishes. Therefore, constructive international monetary reform calls for the Fed to abandon its zero‐interest rate policy, which is best done in cooperation with the European Central Bank, the Bank of Japan, and the Bank of England also abandoning their ultra low interest rates.     

STAGFLATIONARY CONSEQUENCES OF PRUDENT MONETARY POLICY IN A UNIONIZED ECONOMY

Stylised models of the policy game between monetary policy makersand the private sector have suggested that discretionary policyregimes suffer from an inherent inflationary bias and that pre-commitmentto a target rate of inflation may be desirable. This paper showsthat in the presence of labour unions, the monetary policy gamecan lead to radically different results: a central bank thatis completely indifferent to the level of inflation may obtainoutcomes with high employment rates and zero inflation while‘prudent’, inflation-averse, central banks generatestagflation with positive inflation and low rates of employment.     

Monetary analysis and the global financial cycle: An Asian central bank perspective

Emerging Asia has seen a transformation of its monetary policy environment over the past two decades. By far, the most relevant change has been the maturing of its financial systems and the growing relevance of the global financial cycle: financial inclusion has spread, financial markets have deepened and financial globalisation has linked domestic markets closer to international markets. One consequence of the maturing of the financial systems has been the weakening of the traditional case for the monetarist view of the roles of monetary aggregates in the conduct of monetary policy. In addition, the maturing of the financial systems has elevated concerns of financial stability, as both a source of shocks and a responsibility of central banks. These developments have been further complicated by monetary policy spillovers from the advanced economies. All this points to the need to consider alternatives to conventional inflation targeting frameworks. This paper lays out a policy framework based on a multi-pillar monetary policy approach as a potentially attractive alternative for EM Asia. The three pillars are based on economic, financial and exchange rate stability, respectively. This framework not only offers an alternative conceptual framework but also implies institutional reforms to ensure central banks take a longer term perspective when setting policy.     

DYNAMIC EFFECTS OF MONETARY POLICY SHOCKS IN MALAWI

This paper sets out to investigate the process through which monetary policy affects economic activity in Malawi. Using innovation accounting in a structural vector autoregressive model, it is established that monetary authorities in Malawi employ hybrid operating procedures and pursue both price stability and high growth and employment objectives. Two operating targets of monetary policy are identified, viz., bank rate and reserve money, and it is demonstrated that the former is a more effective measure of monetary policy than the latter. The study also illustrates that bank lending, exchange rates and aggregate money supply contain important additional information in the transmission process of monetary policy shocks in Malawi. Furthermore, it is shown that the floatation of the Malawi Kwacha in February 1994 had considerable effects on the country's monetary transmission process. In the post‐1994 period, the role of exchange rates became more conspicuous than before although its impact was weakened, and the importance of aggregate money supply and bank lending in transmitting monetary policy impulses was enhanced. Overall, the monetary transmission process evolved from a weak, blurred process to a somewhat strong, less ambiguous mechanism.     

Monetary Policy Uncertainty and Inflation: The Role of Central Bank Accountability

We analyse the issue of central bank accountability with the aid of a simple monetary policy game with uncertainty about the agent's inflation stabilisation preferences. We find that there may be an important economic role for accountability in addition to its political function of making the central bank answerable to voters through its accountability to the executive. The model suggests that for countries with relatively little central bank independence, or perhaps a poor inflationary track record, significant reductions in inflation can be achieved by lowering monetary policy uncertainty. These reductions are much smaller for inflation-averse central banks, when monetary policy uncertainty is reduced by the same absolute amount. Thus, the effectiveness of accountability – as a means of lowering both inflation and inflation uncertainty – is higher the lower the degree of central bank conservativeness.     

从“三元悖论”谈我国人民币汇率制度的选择

作为经典的汇率制度选择依据——“三元悖论“，长期以来一直被学术界所信奉，同样在我国，近年来关于人民币汇率制度的选择问题也是一直以此为基石。认为人民币汇率制度的选择主要依据是我国中央银行的货币政策自主。然而本文将利用Mendel-Fleming和Mendel-Fleming-Dombusch两个模型去分析，得出即使在国际资本完全不自由流动下的固定汇率政策以及在国际资本的完全自由流动情况下的浮动汇率政策都无法完全得以实现，从而理清了我国人民币汇率制度选择时依赖于中央银行货币政策自主的模糊认识。