IMF高级宏观经济学研修班课程CT1405MMF-L02Moneta.pptx

IMF高级宏观经济学研修班课程CT1405MMF-L02Moneta.pptx

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L-2.MonetaryandExchangeRatePolicyFrameworksandStrategies,PresenterRayBrooks,JointChina-IMFTrainingProgramCourseonMacroeconomicManagementandFinancialSectorIssuesCT14.05,Outline,Whataretheultimategoalsofmonetarypolicy?

Whatarethealternativeframeworksandhowdotheywork?

Howtochooseamonetaryframework?

Whatchoicesweremadeinthepast?

Howwelldidtheyperform?

Chinaschoices,2,ThistrainingmaterialisthepropertyoftheInternationalMonetaryFund（IMF）andisintendedforuseinIMFsInstituteforCapacitydevelopment（ICD）courses.AnyreuserequiresthepermissionofICD.,I.Whataretheultimategoalsofmonetarypolicy?

1.Pricestability2.Outputandemployment3.Exchangeratestability4.Postglobalcrisis,callstoalsotargetfinancialstability,3,Therelationshipbetweeninflationandcyclicalunemploymenthaschangedovertime,ApparentthattheslopeofPhillipscurvehasfallen,JV13.13.,5,Source:

April2013WEO,Whatcanmonetarypolicydo?

CaneffectivelycontrolpricesandexchangeratesnominalvariablesCanserveasanominalanchorintheeconomyCancontributetoeconomicgrowthandhelpcreatejobsthroughlowandstableinflationButitcannotbearealanchorunemployment,growth,andrealexchangeratecannotbeaffectedpersistently,6,JV13.13.,Monetarypolicyaffectsdemand,notsupply,ToomuchdemandstimulusstokesinflationStabilizeoutputarounditspotentialandinflationaroundtheinflationtargetJointlyminimizevolatilityofoutputandinflationsy;sp,7,Quantity,Price,AD,AS,Long-runAS,JV13.13.,ExchangeRatePolicy:

Overview,Intheshortrun,thenominalERlevelaffectstherealexchangerate:

Ifdomesticinflationishigh,afixedexchangeratemightappreciatetheRER.“Therealexchangerateisalwaysflexible”AnappreciatedRERaffectscompetitivenessofexportsandcanleadtocurrentaccountdeficits.AflexibleERmightbeapowerfultooltorestoreexternalequilibrium.,8,II.WhataretheAlternativeMonetaryandExchangerateFrameworksandhowdotheywork?

“Therearemanywaystoskinacat”StoneandBhundiaclassification,9,JV13.13.,10,Compatiblechoices,Countriesneedtochooseamonetarypolicystrategy（e.g.,moneygrowthtargetsorinflationtargets）andanexchangeratearrangementThetwochoicesmustbecompatible,JV13.13.,TheImpossibleTrinity,11,CAPITALCONTROLS,Monetaryindependence,HardPeg,PUREFLOAT,CapitalMobility,increasingcapitalmobility,Exchangeratestability,China,U.S.,Japan,EU,12,The“impossibletrinity”,Itisimpossibletosimultaneouslymaintain:

afixedexchangerateandautonomousmonetarypolicytopursuegoalsfordomesticeconomicactivityandpricestabilityiftheeconomyreliesonalargevolumeofpotentiallyvolatileandinternationallymobilesourcesoffinance,JV13.13.,FourViableAlternativeMonetaryandExchangeRateRegimes,ExchangeratetargetingMonetaryaggregatestargetingInflationtargetingOther“eclectic”frameworks,13,JV13.13.,14,HARDPEGSExchangearrangementswithnoseparatelegaltenderCurrencyunionDollarizationCurrencyboard,INTERMEDIATE（SoftPegs）ConventionalpegStabilizedarrangementPegwithhorizontalbandsCrawlingpegCrawl-likearrangement,FLOATINGFloatingFreefloating,RangeofOptionsforExchangeRate,1.Exchangeratetargeting,TheexchangerateisthenominalanchorPre-World-War-IgoldstandardBretton-Woodsregime（1945-71）AllcountriespeggingtogoldthroughtheU.S.dollarArgentinascurrencyboard（1991-2001）“Hard”pegDollarpeginSouthKorea,Thailand,Indonesia“Soft”pegWestAfricaMonetaryUnion,EuropeanMonetaryUnion（regionalsystem）,15,JV13.13.,HowdoesERtargetingwork?

KeeptheERontarget（level,“crawl”,andsoon）Aslongasthecapitalaccountisatleastpartlyopen,domesticinterestrateworldinterestrate+riskpremiumThe“lawofoneprice”（PPP）willtakecareofinflationconvergence（dz=p*-p）MaintainliquidityinthebankingsystemItsacomparativelysimpleregimetooperate!

16,JV13.13.,“Thedevilisinthedetail”,Acountrymaysaythattheyaremaintainingacrawlingpeg/managedfloat/freefloat,but:

HavenovolatilityoftheexchangerateWhileofficiallyfloating,somecentralbanksusedtophonecommercialbankwith“suggested”ERsAccumulateinternationalreservesDistinguishdejureanddefactoregimes!

ChinaisdejuremanagedfloatingarrangementButdefactoclassifiedasa“crawl-likearrangement”byIMFin2013ArticleIV（astheRMB-U.S.$ratehasremainedina2percentcrawlingband）,17,JV13.13.,ChinaspegwasstableagainstUS$mid-1990stomid2000sbutnominaleffectiveexchangeratemoved,JV13.13.,18,Chinasrealeffectiveexchangeratehasappreciatedmorethanthenominalrate,JV13.13.,19,2.Monetaryaggregatestargeting,Monetarygrowthisthenominalanchor.Basedonthequantitytheoryofmoney（Friedman,1956）:

MV=PYInflationfrom“manydollarsbehindfewgoods.”Monetarypolicyinstrumentsadjustedtotargetgrowthrateofmoneysupply（e.g.,broadmoney）,20,JV13.13.,2.Monetaryaggregatestargeting,TheexchangeratehastofloataslongasthecapitalaccountisopenThefiscalpositionmustbeundercontrol.Why?

M2=NFA+NDA.Examples:

Industrialcountries（thelate-1970stomid-1980s）About30countriestoday（mostlylow-income）InspiredtheECBsMonetaryPillar.,21,JV13.13.,HowdoesMTwork?

22,1.Provideliquidityconsistentwithyour,2.intermediatetarget（M2growth）,3.toachieveyourultimateobjective（p*）,Needtobelieveinp=f（M）,JV13.13.,3.Inflationtargeting,InflationforecastisthenominalanchorAdjustmonetarypolicyinstrumentstokeepthecentralbanksforecastofinflationconsistentwithapre-announcedtargetExamples:

NewZealand,Chile,U.K.,CzechRepublic,Poland,Romania,Thailand,Brazil,Ghana.,23,JV13.13.,24,Istheforecastofinflationontarget?

Yes,Shouldpolicyrespond?

Nochangeininstrument,Determinesizeofresponse,No,Nochangeininstrument,Yes,No,Changeinstrument,“Escapeclauses”permitdeparturefromthetarget,Communicate,Communicate,Communicate,HowdoesITwork?

4.Eclecticmonetarypolicy,Whatisthenominalanchor?

Adjustmonetarypolicyinstrumentstopursuestableeconomicgrowthandlowinflation,butwithnoformallypre-announcedtargetsExamples:

U.S.,EuroArea,Japan,India,.,25,JV13.13.,Howdoeseclecticpolicywork?

Centralbankshaveinflationobjectives,butnotasexplicitontargetandhorizonasformalITcountriesECB:

“inflationbelow,butcloseto,2percent”Fed:

“thegoalsofmaximumemployment,stableprices,andmoderatelong-terminterestrates”.DecisionsarealsobasedonforecastsofinflationGoodsystemtoforecastinflationandagoodunderstandingofthetransmissionmechanismiscrucialDifferencebetweenITsand“eclectics”isadifferentlevelofcommunication,althoughconvergence.,26,JV13.13.,Group,（Breakintogroupsof5-6todiscussquestionbelow.Nominateonepersonfromyourgroupwhowillsummarizethediscussion）WhatarethekeyfactorsbehindChinaschoiceofmonetaryandexchangerateframeworkinrecentyears?

27,III.Howtochooseamonetaryframework,Therearealwaysprosandcons,28,JV13.13.,29,Whatistheappropriatemonetaryandexchangeratepolicyregime?

ManyconsiderationsarerelevantSimilarcountriessometimesmakedifferentchoicesThebestchoiceforanyparticularcountrymaychangeovertime,JV13.13.,Choiceofmonetaryframework,Eachmonetaryframeworkhasitsadvantagesanddisadvantages.Thechoicedependsonpolicyobjectivesandtheirrelativeimportance:

Reduce/stabilizeinflationStabilizeoutputfluctuationsU.S.:

“maximumsustainableemploymentandlowinflation”Avoidfinancialcrises（financialstability）Internationalorregionaleconomicintegration,30,JV13.13.,1.Exchangeratetargeting,ProvidedtheauthoritieshaveaclearcommitmenttoERstability,expectationsofinflationwillstabilizeShort-rundeviationsareinevitableAlonglistofrisks,31,JV13.13.,Risksofexchangeratetargeting,FiscaldominanceunderminestheregimeThepegcurrencymaynotbeconsistentwithtradepatterns（ex.ArgentineanandBrazilianpegstotheU.S.$inthe1990sandsubsequentexits）PegsencouragebuildupofbalancesheetvulnerabilitiesPrivatesectorusedtostableexchangerateignoresexchangeraterisk（plusbailoutexpectations）Buildupinforeigncurrencydebt（Asiancrisis,HungaryandRomanialately）,32,JV13.13.,ChinasCurrentAccountSurplushasfalleninrecentyearsandREERhasappreciated,33,Impossibletrinityagain,LossofmonetarypolicyasastabilizationtoolWithinternationalcapitalmobility,impossibletotargetexchangerateandusemonetarypolicyforoutputstabilizationButthelossofindependentmonetarypolicymaybeoffsetbybenefitsofregionalintegratione.g.Euroarea,WAEMUEliminatingexchangeraterisklowerstransactionscostsandincreasestrade,34,JV13.13.,BottomlineonERtargeting,Simpletooperate“Gainsfromtrade”canhelp“import”lowinflationFiscaldominanceNeedtofindtherightpegcurrency（orbasket）LossofmonetarypolicyasastabilizationtoolHigherriskofspeculativeattacksandcrisesFinancialsectorvulnerabilitiesasprivatesectortakesonexchangerateriskCostsofsterilizationforcentralbanks,35,JV13.13.,a,JV13.13.,36,Source:

AndrewCheng,2013PBCConferenceonCapitalFlows,2.MonetaryAggregatestargeting,Formonetarytargetingtoachievepricestability,theremustbeastablerelationshipbetweenmonetaryaggregatesandinflationInmanycountries,thishasbrokendownovertheyearsbecauseoffinancialinnovationsmakingvelocityunstableanddifficulttoforecast.Monetarytargetinghaslostmuchofitsappeal,37,JV13.13.,VelocityofM2wasunstablein70sand80s,esp.inGermanyandJapan,JV13.13.,38,InChinatoo,thelinkbetweenmoneyandnominalGDPhasbeennotbeenstable,39,Bottomlineonmonetarytargeting,OperationalsimplicityandtheoreticallysoundbuttheregimeisnotintuitiveThepublicdoesnotunderstandwhatis“broadmoney”,“narrowmoney”,etcEmpiricallydubiousThesho