Changes in monetary policy implementation over time

Dawid van Lill

Studies in Economics and Econometrics, 2024, vol. 48, issue 1, 62-86

Abstract: In this study, we utilise a time-varying parameter vector autoregressive model to investigate the relationship between central bank liabilities and the overnight policy rate across three countries with distinct monetary policy frameworks. Our findings reveal that a consistent negative correlation between these variables is present only in the case of the conventional reserve regime. For the other regimes, an initial significant negative relationship between reserves and interest rates is observed, but this effect diminishes with the adoption of new frameworks. These results suggest that the emergence of novel operational structures for central banks has disrupted the traditional approach to monetary policy implementation. One practical consequence of this” decoupling” between interest rates and reserves is that central banks in the United States, Canada, and similar systems can effectively employ their balance sheets in conjunction with standard interest rate policies. However, this does not apply to reserve regimes that continue to depend on open market operations for steering interest rates

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/03796205.2023.2273489 (text/html)
Access to full text is restricted to subscribers.

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:taf:rseexx:v:48:y:2024:i:1:p:62-86

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rsee20

DOI: 10.1080/03796205.2023.2273489

Access Statistics for this article

Studies in Economics and Econometrics is currently edited by Willem Bester

More articles in Studies in Economics and Econometrics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().