The Conduct of Monetary Policy in the Future

Abstract

JT03372409Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ECO/WKP(2015) © OECD (2015)You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for commercial use and translation rights should be submitted to rights@oecd.org ECO/WKP(2015) The set of monetary policy instruments has expanded since the start of the global financial crisis in the many OECD economies. Against this background, this paper analyses whether some of the new instruments should be retained in the long term when broader financial stability objectives are likely to feature more prominently as monetary policy goals than prior to the crisis. It also assesses if these new instruments should be used during the transition to this situation and when countries are stuck in persistent stagnation. In the post recovery situation, central banks could ultimately revert to targeting short-term market rates with small balance sheets. This might, however, require changes to monetary policy implementation due to new liquidity requirements. The transition to this situation will be lengthy and will require a mixture of liquidity draining instruments. Alternatively, they could adopt a floor system, which may benefit financial stability. The use of unconventional measures as a substitute for policy rate cuts will no longer be needed unless countries remain in persistent stagnation. Nevertheless, in the post-recovery normal, extended collateral and counterparty eligibility could be sustained, and currency swap lines among central banks could be expanded. JEL classification codes: E42, E43, E52, E53, F33.Keywords: conventional and unconventional monetary policy, corridor and floor interest rate systems, liquidity, quantitative easing, forward guidance. *** La conduite de la politique monétaire à l'avenir : L'utilisation d'instrumentsDans de nombreux pays de l'OCDE, la palette des instruments de la politique monétaire s'est élargie depuis le début de la crise financière mondiale. Dans ce contexte, on s'efforce dans le présent document d'analyser s'il conviendrait de conserver certains de ces nouveaux instruments dans la durée, lorsque les objectifs de stabilité financière au sens large s'affirmeront probablement davantage en tant qu'objectifs de la politique monétaires qu'avant la crise. Il s'agit également d'évaluer si ces nouveaux instruments doivent être utilisés pendant la période de transition, et lorsque les pays sont enlisés dans une stagnation persistante. Après la reprise, les banques centrales pourraient revenir au ciblage des taux de marché à court terme ave...