Implementation of Monetary Policy and the Central Bank's Balance Sheet

Author/Editor:

Andrea Schaechter

Publication Date:

October 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper discusses how the choice of central banks' operating targets influences the use of their monetary policy instruments and how the latter affect the central bank's balance sheet. This is of particular interest, since the monetary conditionality in IMF-supported programs has traditionally been linked to central bank balance sheet items. Quantity targeting tends to be practiced today mostly in countries in which money markets are not yet well-developed or a monetary aggregate is used as the intermediate target. Most other central banks prefer to target a short-term interest rate, which results in day-to-day changes in balance sheet items becoming endogenous.

Series:

Working Paper No. 2001/149

Subject:

Banking Central bank balance sheet Central banks Demand for money Financial services Monetary base Money Open market operations Short term interest rates

English

Publication Date:

October 1, 2001

ISBN/ISSN:

9781451856897/1018-5941

Stock No:

WPIEA1492001

Pages:

28

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