On Modeling Monetary Policy Implementation

21 Pages Posted: 8 Oct 2018

See all articles by Tiantian Dai

Tiantian Dai

Central University of Finance and Economics (CUFE) - China Economics and Management Academy

Chao He

East China Normal University (ECNU)

Date Written: September 16, 2018

Abstract

This paper studies three types of monetary policy interventions: open market operations (OMO), standing facilities (SF), and lump-sum transfers (LST). Without financial frictions, only money growth rate – and not the specific monetary interventions – matters. Both SF and OMO can be used in two different ways. With SF, for example, the central bank can either lend more tomorrow than today or keep borrowing and use the interest payment to expand the money supply. The Friedman rule can be implemented by the first way but not the second way.

Keywords: Monetary Policy Implementation, Standing Facilities, Open Market Operations

JEL Classification: E52, E58, E44

Suggested Citation

Dai, Tiantian and He, Chao, On Modeling Monetary Policy Implementation (September 16, 2018). Available at SSRN: https://ssrn.com/abstract=3250143 or http://dx.doi.org/10.2139/ssrn.3250143

Tiantian Dai

Central University of Finance and Economics (CUFE) - China Economics and Management Academy ( email )

NO.39 South College Road
Haidian District
Beijing, 100081
China

Chao He (Contact Author)

East China Normal University (ECNU) ( email )

North Zhongshan Road Campus
3663 N. Zhongshan Rd.
Shanghai, 200062
China

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