Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Frameworks

Nils Maehle

No 2020/026, IMF Working Papers from International Monetary Fund

Abstract: This paper discusses operational issues for countries that want to reform their monetary policy frameworks. It argues that stabilizing short-term interest rates on a day-to-day basis has significant advantages, and thus that short-term interest rates, not reserve money, in most cases should be the daily operating target, including for countries relying on a money targeting policy strategy. The paper discusses how a policy formulation framework based on monetary aggregates can be combined with an operational framework that ensures more stable and predictable short-term rates to enhance policy transmission. It also discusses how to best configure an interest-rate-based operational framework when markets are underdeveloped and liqudity management capacity is weak.

Keywords: WP; rate; central bank; interest rate; monetary policy; monetary policy operations; monetary targeting; monetary policy transmission; liqudity management; interest rate determination; policy rate; overnight interbank market rate; allotment system; trough central bank term-lending; liquidity forecasting capacity; firm interest rate corridor; interbank market interest rates; central bank credibility; market rate; targeted market rate; Interest rate spread; interbank market rate; Central bank policy rate; Short term interest rates; Interbank rates; Interbank markets; Monetary base; Africa (search for similar items in EconPapers)
Pages: 57
Date: 2020-02-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=48961 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2020/026

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().