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Issues in Monetary Policy The Relationship Between Money and Financial Markets By: Kent Matthews (Editor), Philip M. Booth (Editor) Normal price: 39.99 Our price: 33.99 + postage Bargain: save £6 ! Product code: 23111 ISBN: 0470018194 200 pages Format: Pb Published by: John Wiley & Sons, 2006, 1st edition There are no reviews available for this book

Description of Issues in Monetary Policy

Since the Bank of England was made independent in 1997, the conduct of monetary policy has been relatively uncontroversial. The debates between Keyneisans, monetarists and supporters of fixed exchange rate mechanisms now appear very distant. Despite the apparent consensus there are many issues related to the conduct of monetary policy that are not yet settled and which will soon come to the fore. Is the current form of independence for the Bank of England appropriate? Should a central bank target inflation or the prices level? How does a central bank deal with asset price deflation? Should more account be taken of monetary aggregates? Should central banks target asset prices? What is the relationship between the money supply and asset price inflation? How should central banks ensure financial stability? The IEA was at the forefront of changing the parameters of the debate surrounding monetary policy in the 1970s and 1980s. This text, brings together some of the leading authors in the field, including the current Governor of the Bank of England, to discuss current issues in monetary policy and the relationship between monetary policy and financial markets. It is appropriate for undergraduates and postgraduates in economics and finance as well as for practitioners in financial markets.

Issues in Monetary Policy - Chapter headings

List of contributors. 1. Issues in Monetary Policy (Kent Matthews). 1.1 Introduction. 1.2 The monetarist counter-revolution. 1.3 Practice ahead of theory. 1.4 The dangers of practice without theory. References. 2. Monetary Policy: Practice Ahead of Theory (Mervyn King). 2.1 Introduction. 2.2 What can monetary policy do?. 2.3 Learning and its implcation for monetary policy. 2.4 Inflation targeting as a framework which accommodates learning. 2.5 Conclusion. References. 3. Are the Structure and Responsibilities of the Bank of England Optimal, and if Not, Does it matter (David B. Smith). 3.1 Introduction. 3.2 Current arrangements. 3.3 The conventional theoretical macro model (CTMM). 3.3.1 Role of interest rates in the CTMM. 3.3.2 Time series considerations. 3.4 How the Bank’s main macro model contrained the monetary debate. 3.5 The new Bank of England quarterly model. 3.6 The monerarist case for a big central bank. 3.7 Lessons from Britain’s monetary history. 3.8 Main conclusions. References. 4. Why Price Level Targeting is better than Inflation Targeting (Andrew Lilico). 4.1 Introduction. 4.2 How does inflation targeting and price-level targeting differ?. 4.2.1 Long-term price stability. 4.2.2 Short-term inflation volatility. 4.2.3 Output volatility. 4.3 What is there to gain from long-term price stability?. 4.4 Inflation volatility ? inflation uncertainty. 4.5 Price-level targeting generates its own credibility. 4.6 Price-level targeting is self-regulating. 4.7 Price-level targeting offers excape from a low-employment equilibrium. 4.8 The “costs” of price-level targeting have corresponding benefits. 4.9 Price-level targeting vs. average inflation targeting. 4.10 The history of price-level targeting. 4.11 Conclusion. References. 5. A Price Targeting Regime Compared to a Non Price Targeting Regime. Is Price Stability a Good Idea (Keith Pilbeam). 5.1 Introduction. 5.2 The ultimate objective of economic policy. 5.3 Modeling economic shocks. 5.4 The model. 5.5 Determining Equilibrium. 5.6 A money demand shock. 5.7 Aggregate demand shock. 5.8 An aggregate supply shock. 5.9 The search for an indicator. 5.10 Conclusions. References. 6. Optimal monetary policy with endogenous contracts: Is there a case for price-level targeting and money supply control (Patrick Minford). 6.1 Introduction. 6.2 Considerations in designing monetary policy arrangements. 6.3 Monetary policy: Is inflation targeting the best we can do?. 6.4 Interest rate control - what does it do?. 6.5 Money supply targeting and feedback rules - a stochastic simulation analysis. 6.5.1 Comparing money- and price-level targeting. 6.5.2 Should we use interest rates rather than the money supply as the short-term instrument of control?. 6.5.3 How important is the zero bound in setting the inflation target rate?. 6.6 Conclusions. Bibliography and references. Annex: The representative agent model (RAM). 7. Forecasting Inflation: The Inflation ‘Fan Charts’ (Kevin Dowd). 7.1 Inflation forecasting. 7.2 The inflation fan charts. 7.3 The Bank’s forecast inflation density function. 7.4 Evaluating the Bank’s inflation forecasts. 7.4.1 Backtesting of the fan charts. 7.4.2 The credibility of the fan charts vs. the stability of the inflation rate. 7.4.3 The Bank’s forecasts versus those of a naïve alternative. 7.4.4 The MPC’s density forecasts vs. the empirical inflation rate. 7.5 Conclusions. References. Annex: The two-piece normal density function. 8. Asset Prices, Financial Stability, and Role of the Central Bank (Forrest Capie and Geoffrey Wood). 8.1 Introduction. 8.2 What is price stability?. 8.3 Financial stability. 8.4 The lender of last resort. 8.5 Do asset prices matter?. 8.6 Should institutions bepropped up?. 8.7 Financial benefits of monetary stability. 8.8 Conclusions. References. 9. Money, asset prices and the boom-bust cycles in the UK: An analysis of the transmission mechanism from money to macro-economic outcomes (Tim Congdon). 9.1 Introduction. 9.2 Traditional accounts of the transmission mechanism. 9.3 Asset prices in the traditional accounts. 9.4 The ownership of capital assets in the UK. 9.4.1 The monetary behaviour of the different sectors of the UK economy. 9.4.2 The monetary behaviour of financial institutions and asset prices: Analytical sketch. 9.5 Asset prices and economic activity. 9.6 Financial sector money in the boom-bust cycles. 9.6.1 Financial sector money and asset prices in the Heath-Barber boom. 9.6.2 Financial sector money and asset prices in the Lawson boom. 9.7 Conclusion: Money and asset prices in the transmission mechanism. Annex: Econometric analysis of one type of real balance effect. References. 10. Monetary Policy and the Bank of Japan (John Greenwood). 10.1 Introduction. 10.2 Japan’s golden era in monetary policy, 1975-85. 10.3 How monetary policy went off the rails, 1985-89. 10.4 The bursting of the bubble, 1989-91. 10.5 Assessment of policy responses. 10.5.1 Initial policy response - fiscal expansion. 10.5.2 Monetary policy - interest rate strategy, 1990-93. 10.5.3 Monetary policy - interest rate strategy, 1993-2001. 10.5.4Monetary policy - quantitative expansion. 10.6Monetary policy - deliberate yen depreciation. 10.7Monetary policy - government borrowing from the banks. 10.8 Restructuring policies. 10.9Conclusion. References. Appendix 1.: Unemployment versus Inflation? An Evaluation of the Phillips Curve (Milton Friedman). Appendix 2. The Counter-Revolution in Monetary Theory (Milton Friedman). Index.