Monetary Targeting: The International Experience*

Argy, Victor; Brennan, Anthony; Stevens, Glenn

doi:10.1111/j.1475-4932.1990.tb02084.x

Cited by 17 publications

(3 citation statements)

References 30 publications

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“…It is tempting to think that the imperative for monetary stability lessened when targeting was abandoned in January 1985, becoming a victim of the rapid deregulation of the Australian ®nancial system in the 1980s. This of®cial explanation does not conform entirely with the views of Argy, et al (1990) who indicate that the decision to abandon targeting in 1985 was explained by the dif®culties associated with attempts to meet monetary targets.…”

Section: Introductionmentioning

confidence: 44%

The Long Run Demand for Broad Money in Australia Subject to Regime Shifts

Felmingham

Qing

2001

Australian Economic Papers

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The goal is to determine if there is a stable Broad Money demand relationship for Australia. Previous studies have not reached a consensus on this important issue, partly because the time series techniques used do not accommodate structural breaks. A standard multivariate cointegration analysis is conducted on monthly data over the period 1976(3) to 1998(4). It reveals some evidence for the presence of cointegration since one cointegrating vector is found. This involves broad money, the spread between interest on broad money and on non-money assets and real GDP. The evidence of cointegration is again present when a structural break is found in the relationship using Gregory and Hansen (GH) methodology. This occurs in 1991 coinciding with a deep recession and policy induced, interest rate reductions. The income elasticity of demand exceeds one, reacts positively to the interest spread and negatively to in¯ation. I. I n t ro d u c t i o nThe task here is to test for the existence of a long run Australian Broad Money (MB) demand relationship in the presence of potential structural breaks. Previous studies of Australia's demand for MB have not allowed for the possibility of regime shifts. The last important analysis of this issue by de Brouwer et al. (1993) was conducted prior to advances in time series analysis which allowed for structural breaks in cointegrating relationships. This study is designed to extend our knowledge of the behaviour of MB demand to allow for regime shifts. The signi®cant motivations for a further analysis of Broad Money (MB) are ®rst, the importance of a predictable, long run relationship between monetary aggregates such as broad money and other jointly determined economic variables in a general macroeconomic equilibrium and second, the signi®cance of the linkage between the selected monetary aggregate and monetary policy.In regards to the ®rst motivation, once it is agreed that long run money demand relationships are endogenous being determined in an overall structure along with output, in¯ation, interest rates and other variables, then the stability and predictability of money demand in¯uences the stability of any general macro equilibrium. So the quest for a well determined,

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Section: Introductionmentioning

confidence: 44%

The Long Run Demand for Broad Money in Australia Subject to Regime Shifts

Felmingham

Qing

2001

Australian Economic Papers

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“…Several advanced countries (Australia, Canada, Spain, and UK) switched to inflation targeting after some unsuccessful experience with monetary targeting. The latter strategy failed to achieve good economic results due to money demand instability and a feeble relationship between monetary aggregates and inflation (Argy, Brennan, andStevens 1990, Freedman andLaxton 2009). Since monetary targets were more often missed than reached, central banks were searching for an alternative anchor to control inflation.…”

Section: Money Growth Volatilitymentioning

confidence: 99%

Right on Target: Exploring the Determinants of Inflation Targeting Adoption

Samarina

Haan

2011

SSRN Journal

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“…35 Even the Bundesbank applied monetary targeting with a feedback mechanism, never refraining "from using new information, for fear of being caught in a credibility dilemma" (Issing (1995)). Indeed, the record of monetary targeting has been quite poor in a number of countries although the monetary targets have frequently been set in terms of, sometimes wide, target ranges (see Griffiths and Wood (1981a), Isard and Rojas-Suarez (1986), Argy, Brennan, and Stevens (1990)).…”

Section: Figure 8 Volatility Of Money Velocitymentioning

confidence: 99%