Monetary policy implementation frameworks: A comparative analysis

Arbeitspapier

We compare two stylized frameworks for the implementation of monetary policy. The first framework relies only on standing facilities, and the second one relies only on open market operations. We show that the Friedman rule cannot be implemented in the first framework, but can be implemented using the second framework. However, for a given rate of inflation, we show that the first framework unambiguously achieves higher welfare than the second one. We conclude that an optimal system of monetary policy implementation should contain elements of both frameworks. Our results also suggest that any such system should pay interest on both required and excess reserves.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 313

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Central Banks and Their Policies ; Monetary Policy, Central Banking, and the Supply of Money and Credit: Other
• Subject: Monetary policy implementation ; standing facilities ; open market operations ; Geldpolitik ; Offenmarktpolitik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Martin, Antoine ; Monnet, Cyril
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/60921
• Last update: 10.03.2025, 11:44 AM CET