Transcript 8.貨幣政策之執行The Conduct of Monetary Policy: Tools, Goals, and

Chapter Eight
THE CONDUCT OF MONETARY
POLICY: TOOLS, GOALS, AND
TARGETS
Copyright © 2000 Addison Wesley Longman
Slide #8-1
The Federal Reserve Balance
Sheet
Fed
Note: reserve包含銀行在央行的存款及
銀行持有的currency，CIC不包含銀行持
的currency
Government
Currency in circulation
security
Discount loans reserve
有賺利息
不支息
Monetary Base = Currency + Reserves
Open Market Purchase from Bank
The Banking System
Assets
Securities
- $100
Reserves
+ $100
Liabilities
Copyright © 2000 Addison Wesley Longman
The Fed
Assets
Securities
+ $100
Liabilities
Reserves
+ $100
Result: R  $100, MB  $100
Slide #8-2
The Federal Reserve Balance
Sheet
Open Market Purchase from Public
Public
Assets
Liabilities
Securities
- $100
Deposits
+ $100
Banking System
Assets
Liabilities
Reserves
Deposits
+ $100
+ $100
Copyright © 2000 Addison Wesley Longman
The Fed
Assets
Liabilities
Securities
Reserves
+ $100 +$100
Result: R  $100, MB  $100
Slide #8-3
The Federal Reserve Balance
Sheet
Discount Loans
Banking System
Assets
Reserves
+ $100
Liabilities
Discount
loan + $100
The Fed
Assets
Discount
loan + $100
Liabilities
Reserves
+ $100
Result: R  $100, MB  $100
Copyright © 2000 Addison Wesley Longman
Slide #8-4
Market for Reserves and the Fed Funds Rate
Reserve
= required reserve + excess reserve
iff 
opportunity
cost of
holding ER
iff銀行較願
意向央行借
DL再拆放給
同業，以賺取
較高的iff
Copyright © 2000 Addison Wesley Longman
1. Demand
curve
slopes
down
because iff
, ER 
and Rd up
2. Supply
curve
slopes up
because iff
, DL , Rs

3. Equilibrium
iff where
Rd = Rs
Slide #8-5
Response to Open Market Operation or
Change in Discount Rate
∴本張和上張投影片之結論：
iff代表央採擴張貨幣政策
iff 代表央行採緊縮貨幣政策
Copyright © 2000 Addison Wesley Longman
1. Open
market
purchase,
Rs shifts to
right and iff

2. id , DL ,
Rs shifts to
right and iff

Slide #8-6
Response to Change in Required
Reserves
1. RR ,
Rd
shifts
to
right, iff

Copyright © 2000 Addison Wesley Longman
Slide #8-7
Tools of Monetary Policy
Open Market Operations
1. Dynamic:
Meant to change Reserves
2. Defensive:
Meant to offset other factors affecting Reserves, typically
uses repos and reverse repos
Advantages of Open Market Operations
1. Fed has complete control
2. Flexible and precise
3. Easily reversed: effect is reversed on the day the
agreement matures
4. Implemented quickly
Copyright © 2000 Addison Wesley Longman
Slide #8-8
Discount Loans
Fed affects discount loan thru price (discount rate) and quantity
控制下面3種 quantity
3 Types
1. Adjustment Credit: easily obtained
有
給愈有severe liquidity 需求之銀行
代 2. Seasonal Credit
價
3. Extended Credit: more difficult to obtain
Lender of Last Resort Function
也 1. To prevent banking panics: FDIC fund not big enough
有
Examples: Continental Illinois and Franklin National Banks
代
價
2. To prevent nonbank financial panics
Example: 1987 stock market crash
若央行決定進行open market sales (緊縮貨幣政策) 之後
Announcement Effect
，又宣布將提高discount rate，則外界可能解釋為加強
ff，
1. Problem: False signals 緊縮效果。但事實可能不是如此。因為OMS會使得i
若央行不及時提高discount rate，則銀行可能借discount
Copyright © 2000 Addison Wesley Longman
loan，再以高的 iff貸放出去。
Slide #8-9
Reserve Requirements
Advantages
1. Powerful effect
Disadvantages
1. Small changes have very large effect on
Ms
2. Raising causes liquidity problems for
banks
3. Frequent changes cause uncertainty for
banks
4. Tax on banks
Copyright © 2000 Addison Wesley Longman
Slide #8-10
Goals of Monetary Policy
Goals
Structural
Frictional
1. High Employment Natural rate of
2. Economic Growth 高就業、高投資+高儲蓄
Supply-side economics
3. Price Stability
透過減稅
4. Interest Rate Stability
5. Financial Market Stability
6. Foreign Exchange Market Stability
Goals often in conflict
Copyright © 2000 Addison Wesley Longman
當景氣擴張、失業率降低時，常會造
成利率上升，通膨也上升。此時央行
若為了控制利率穩定而採降息措施，
則可能導致景氣過熱，通膨更高。但
若為了控制物價穩定，而讓利率繼續
上升，則可能導致短期內失業率上升
Slide #8-11
。
Central Bank Strategy
NBR=total reserve-borrowed reserve
Discount loan
MB- borrowed reserve
Or T-bill rate
Copyright © 2000 Addison Wesley Longman
Slide #8-12
Money Supply Target
Monetary aggregate reserve aggregate
1. Md fluctuates
between Md'
and Md''
2. With Mtarget at M*,
i fluctuates
between i '
and i ''
Copyright © 2000 Addison Wesley Longman
Slide #8-13
Interest Rate Target
1. Md
fluctuates
between
Md' and
Md''
2. To set itarget at i*,
Ms
fluctuates
between
M ' and
M '’
Copyright © 2000 Addison Wesley Longman
Slide #8-14
Criteria for Choosing Targets
Criteria for Intermediate Targets
and accurate measurement，似乎利率比
1. Measurability quick
monetary aggregate較佳，但有名目利率的問題
2. Controllability利率比monetary aggregate較佳，但有名目利率的問題
3. Ability to predictably affect goals: open for debate
Interest rates aren't clearly better than Ms on criteria 1 and 2
because hard to measure and control real interest rates
Criteria for Operating Targets
Same criteria as above
Reserve aggregates and interest rates about equal on criteria
1 and 2. But for 3, if monetary aggregate is used as the
intermediate target then reserve aggregate is better used as
the operating target.
Copyright © 2000 Addison Wesley Longman
Slide #8-15
History of Fed Policy Procedures
只要銀行拿著貸款客戶開立的
票據來央行discount window，
央行就會借錢給該銀行，因為
這些錢會是for production use
Early Years: Discounting as Primary Tool
1. Real bills doctrine
2. Rise in discount rates in 1920: recession 1920-21
To lower the inflation
Discovery of Open Market Operations
1. Made discovery when purchased bonds to get income in
1920s
Great Depression
1. Failure to prevent bank failures
2. Result: sharp drop in Ms
Copyright © 2000 Addison Wesley Longman
當時央行認為bank failure只是大恐慌
的產物，而非原因之一。
Slide #8-16
History of Fed Policy
Procedures
Pegging of Interest Rates: 1942-51
1. To help finance war, T-bill at 3/8%, T-bond at
2
1/2% 每當利率有上升壓力時，Fed就作OMP，使利率不會上升，但會導
致M及通膨
2. Fed-Treasury Accord in March 1951
以Money Market Conditions: 1950s and 60s
為目標
1. Free reserves = ER - DL 為何要減去?
當FR, 表示money market condition越寬鬆
2. Interest rates
所以應作open market sales，以降低free
Short-term
Copyright © 2000 Addison Wesley Longman
reserve
Slide #8-17
History of Fed Policy
Procedures
Intermediate
但事實上with broad band
Targeting Monetary Aggregates: 1970s
1. Fed funds rate as operating target with narrow band
I
s
控制利率為目標，就會使Ms變來變去
2. Procyclical M
M
New Operating Procedures: 1979-82
所以這段期間iff變化加大
1. Deemphasis on fed funds rate
，但Ms變化卻也加大，原
2. Nonborrowed reserves operating target 因是央行並未認真執行。
3. Fed still using interest rates to affect economy and
inflation
Deemphasis of Monetary Aggregates: 1982 -Early
1990s 當景氣擴張時，利率上升，則銀行會較有意願來借DL，這時央行
為了控制DL，就必須作OMP，使利率下降
1. Borrowed Reserves (DL) operating target
Copyright © 2000 Addison Wesley Longman
所以以控制DL為目
標，就會使利率較穩
定
Slide #8-18
Federal Funds Rate and Money Growth
Before and After October 1979
Copyright © 2000 Addison Wesley Longman
Slide #8-19
History of Fed Policy
Procedures
Fed Funds Targeting Again:1990’s and beyond
1. Fed funds target now announced
International Considerations
以提升美國出口
1. M  in 1985 to lower exchange rate, M  in 1987 to
raise it
2. International policy coordination
Copyright © 2000 Addison Wesley Longman
Slide #8-20
Monetary Targeting Abroad
United Kingdom
1. Targets M3 and later M0
2. Problems of M as monetary indicator
Canada
1. Targets M1 till 1982, then abandons it
2. 1988: declining π targets, M2 as guide
Germany
1. Targets central bank money, then M3 in 1988
2. Allows growth outside target for 2-3 years, but then
reverses overshoots
3. 1990s: dilemma of restrain π, but keep exchange rate in
EMS (European Monetary System)
Copyright © 2000 Addison Wesley Longman
Slide #8-21
Monetary Targeting Abroad
Japan
定期公告
1. Forecasts M2 + CDs
2. Innovation and deregulation makes less useful as
monetary indicator
3. High money growth 1987-89: "bubble economy", then
tight money policy
Copyright © 2000 Addison Wesley Longman
Slide #8-22
Inflation Targeting
Lessons from Monetary Targeting
1. Success requires correcting overshoots
2. Operating procedures not critical
3. Breakdown of relationship between M and goals made M-targeting
untenable: Led to inflation targeting
Inflation Targeting: New Zealand, U.K., Canada
1. Announcement of numerical π goal
2. Commitment to price stability
3. Communication with "Inflation Report"
Lessons from Inflation Targeting
1. Decline in π still led to output loss
2. Worked to keep π low
3. Kept π in public eye: reduced political pressures for inflationary policy
Copyright © 2000 Addison Wesley Longman
Slide #8-23
Using a Fed Watcher
Fed watcher predicts monetary tightening, i 
1.
2.
Acquire funds at current low i
Buy $ in FX market
Fed watcher predict monetary loosening, i 
1.
2.
3.
Make loans now at high i
Buy bonds, price rise in future
Sell $ in FX market
Copyright © 2000 Addison Wesley Longman
Slide #8-24