Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of New York
Staff Reports
Monetary policy implementation frameworks: a comparative analysis
Antoine Martin
Cyril Monnet
Abstract

We compare two stylized frameworks for the implementation of monetary policy. The first framework relies only on standing facilities, and the second one relies only on open market operations. We show that the Friedman rule cannot be implemented in the first framework, but can be implemented using the second framework. However, for a given rate of inflation, we show that the first framework unambiguously achieves higher welfare than the second one. We conclude that an optimal system of monetary policy implementation should contain elements of both frameworks. Our results also suggest that any such system should pay interest on both required and excess reserves.


Download Full text
Download Full text
Cite this item
Antoine Martin & Cyril Monnet, Monetary policy implementation frameworks: a comparative analysis, Federal Reserve Bank of New York, Staff Reports 313, 2008.
More from this series
JEL Classification:
Subject headings:
Keywords: Monetary policy ; Open market operations ; Friedman; Milton ; Banks and banking; Central
For corrections, contact Amy Farber ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal