In a model with imperfect money, credit and reserve markets, we examine if an inflation-targeting central bank applying the funds rate operating procedure to indirectly control market interest rates also needs a monetary aggregate as policy instrument. We show that if private agents use...

In this paper, it is argued that money supply in a narrow sense and repo interest rate are two independent monetary policy instruments when the effect of interest rate policy cannot be efficiently transmitted to the economy through the monetary and financial markets. In this case, the control of...

The mainstream inflation-targeting literature makes the strong assumption that the central bank can exactly target the interest rate which affects investment and consumption decisions and hence the money supply plays no role in the monetary policy strategy. This assumption is equivalent to...

The mainstream inflation-targeting literature makes the strong assumption that the central bank can exactly target the interest rate which affects investment and consumption decisions and hence the money supply plays no role in the monetary policy strategy. This assumption is equivalent to...

Does Friedman’s k-percent rule guarantee a unique equilibrium outcome? We show analytically the answer to this question is sensitive to the method of aggregation. Focusing on broad measures of money, we show that fixing the growth rate of the true monetary aggregate will generate a unique...

In most advanced economies, risk-free interest rates – i.e. the rates applicable to assets with minimal credit risk – have fallen to historically low levels over the recent period, in both nominal and real terms. These interest rates are particularly important because they serve as the basis...

Cet article étudie la stabilité macroéconomique lorsque la Banque Centrale intègre dans sa règle du taux d'intérêt optimale les cours boursiers. Nous montrons que lorsque la Banque Centrale a une forte aversion pour l'inflation en attribuant un poids important à l'objectif de l'inflation...

Using an aggregate dynamic macroeconomic model, we study the macroeconomic and financial stability under flexible inflation-targeting regime associated with intermediate monetary growth target. Central banks, using the inflation target as a communication and strong nominal anchoring device,...

The four major banks (BOJ, FRB, BOE and ECB) have adopted unconventional monetary policy, or broadly-defined quantitative easing (QE), in the last several years. The broadly-defined QE can be classified into comprehensive easing (CE) and pure-QE. The former is aimed at purchasing assets of...

This paper outlines important lessons for monetary policy. In particular, the role of inflation targeting, which was much acclaimed prior to the financial crisis and since then has not lost much of its endorsement, is critically reviewed. Ignoring the relation between monetary policy and asset...