The Effectiveness of Monetary Policy

Rasche, Robert H.; Williams, Marcela M.

doi:10.20955/r.89.447-490

Cited by 10 publications

(11 citation statements)

References 39 publications

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“…A Keynesian approach takes into account this critique and pushes for a better integration of short and long term goals, and an understanding of the long term neutrality of money (Goodhart 2000). New Keynesians argue that aggregate markets do not clear instantaneously, and, therefore, fiscal policy can be effective in the short term (Jahan et al 2014;Rasche and Williams 2007). Ülgen (2009) makes a case for central bankers to remain more applied than theoretical by arguing that the policies based on formal and theoretical inflation-targeting rules reduce the central bank's flexibility and ability to maintain a trade-off between economic fluctuations and central banking policy.…”

Section: Discussion About Central Banking Policy 4 In Context Of the Resultsmentioning

confidence: 99%

“…The opinion that monetary policy has only a limited role in achieving economic goals gained momentum (Friedman 1968). This opinion is prominent in General Theory (Keynes 1936), writings of other 'Keynesian economists,' and some committees, including the Radcliffe Committee in the United Kingdom and the Kennedy Council of Economic Advisers (USA) (Rasche and Williams 2007). Report of the President (President of the USA 1975) attributed the growth rate of aggregate expenditures in the US during 1965-74 largely to monetary (as well as fiscal) policy.…”

Section: Review Of Literaturementioning

confidence: 99%

“…Around the1970s, 'monetarists' held an opinion that, rather than focusing on targeting short-term nominal interest rates, central banks need to control the quantum of money in the economy as a means to achieve long-term inflation goals. This was mainly since the money stock provided the nominal anchor for the system (Rasche and Williams 2007). Ülgen (2009) opines price stability to be the common determinant of central banking behavior.…”

Section: Inflation and Growth Challengesmentioning

confidence: 99%

See 2 more Smart Citations

Can Central Banking Policies Make a Difference in Financial Market Performance in Emerging Economies? The Case of India

2019

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This paper explores the importance of central banking policies in financial market performance, using the case of India. For this purpose, the paper comparatively analyzes the performance of financial markets during the regimes of last three governors of the Reserve Bank of India—Y V Reddy, D Subbarao, and Raghuram Rajan. The paper discusses the central banking policies in these periods with respect to monetary stability, inflation, and growth challenges. The paper presents an analysis of returns and volatility in stock markets and currency markets in their tenures in comparison with those from other selected emerging markets (Brazil, Russia, China, South Africa) and developed markets (USA and UK). The paper also brings out the leverage effect by applying the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model in addition to comparatively analyzing the performance of financial markets. Further, the paper assesses the impact of central banking policies on financial markets by using the fixed effect model on the reference countries for the period under reference.

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Section: Discussion About Central Banking Policy 4 In Context Of the Resultsmentioning

confidence: 99%

Section: Review Of Literaturementioning

confidence: 99%

Section: Inflation and Growth Challengesmentioning

confidence: 99%

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Can Central Banking Policies Make a Difference in Financial Market Performance in Emerging Economies? The Case of India

2019

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“…This skepticism is embedded in the MPIP and supported by empirical evidence. For example, Rasche and Williams' (2007) review of the empirical literature of the effectiveness of monetary stabilization policy "failed to determine a major role for monetary policy in short-run stabilization" (2007, pp. 469, 474).…”

Section: Describes the Problemmentioning

confidence: 99%

“…Indeed, much of the evidence that monetary policy actions affect the real economy comes from a handful of episodes in which an economic recession appears to be "caused" by a monetary contraction (see Rasche and Williams, 2007, for a discussion of these "case studies"). Such episodes provide no basis for believing that monetary policy can successfully stabilize the economy.…”

Section: Describes the Problemmentioning

confidence: 99%

How did we get to inflation targeting and where do we need to go to now? A perspective from the US experience

Thornton

2010

Twenty Years of Inflation Targeting

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Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development

Azam

Khan

Saleem

2023

JFEP

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Purpose This study aims to explore the impact of monetary policy on bank lending rate with the moderating effects of financial sector development for eight Asian developing economics. Design/methodology/approach This study uses panel autoregressive distributed lag/pooled mean group estimation over the period ranging from 1980 to 2020. Findings The empirical results exhibit an inverse link between monetary policy measured by broad money supply on the bank lending rate, indicating that the increase in the money supply by the central bank lowers the demand for loans and thereby lowers the cost of loan. Moreover, financial sector development decreases the lending rate and thus lowers cost of loan. It is also noted that the interactive term of monetary policy by lending broad money supply and financial sector development showed a positive impact on the lending rate in selected Asian developing countries during the period under the study. Practical implications The outcomes have many relevant policy implications that stronger financial development sector contributes to the efficiency of monetary policy. Regulators and policymakers are therefore recommended to pursue greater financial sector development to lower the cost for fund searchers and to lower the cost of loans, money supply increase is suggested. Originality/value This study contributes to the extant literature on the factors affecting lending rate with the prime aims of monetary policy effectiveness. This study also included financial sector development with some other variables and an interactive term of monetary policy with financial development to have new insight impact of both on the lending rate in developing Asian economies.

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The Effectiveness of Monetary Policy

Cited by 10 publications

References 39 publications

Can Central Banking Policies Make a Difference in Financial Market Performance in Emerging Economies? The Case of India

Can Central Banking Policies Make a Difference in Financial Market Performance in Emerging Economies? The Case of India

How did we get to inflation targeting and where do we need to go to now? A perspective from the US experience

Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development

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