Assets matter: New and old views of monetary policy

Stellenbosch Working Paper Series No. WP16/2012
 
Publication date: 2012
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

An extraordinary consensus on the goals and conduct of monetary has been undermined by the international financial crisis and the faltering recovery in many economies. There is an evident need to pay closer attention to developments of asset markets and in the financial sector, which has opened a discussion on the appropriate goals for monetary policy. Meanwhile central banks have employed controversial balance sheet operations to restore market stability and encourage economic recovery. This paper argues that both these developments reflect earlier concerns in monetary policy: prior to the modern consensus both balance sheet policies and an emphasis on financial stability were central concerns of monetary authorities and the future of monetary policy is likely to rhyme with its past.

 
JEL Classification:

E51, E52, E58

Keywords:

monetary policy, interest rate policy, balance sheet operations, financial stability

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BER Weekly

3 August 2020
The week started with news of the confirmation of the $4.3 billion (bn) loan from the International Monetary Fund (IMF) through its Rapid Financing Instrument. In the process of obtaining the loan, the government re-committed itself to the fiscal consolidation outlined in the supplementary budget presented in June, including to introduce zero-based...

Read the full issue