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What is the role of a nominal anchor
A nominal variable which ties down the price level to achieve price stability
What was a nominal anchor historically and currently
Historically a currency peg-link the domestic currency to a currency of a low-inflation country
More recently inflation rate or money supply
Five monetary policy goals
What does the nominal anchor limit
Limits the time consistency problem by establishing long-term goals
monetary policy makers conduct discretionary policy
Focus on short-run objectives
Produce poor long-run outcomes
An example of the time-inconsistency problem
And how does a nominal anchor help prevent the time-inconsistency problem
By providing an expected constraint on discretionary monetary policy
Should price stability be the primary monetary policy goal
What is a hierarchal mandate and a dual mandate
Transparency definition
The absence of asymmetric information between policy makers and economica agents (information disclosure)
What are the effects of central banks analysing economic data/extracts and sharing this information with the private sector
What does independence refer when talking about the central banks design
The freedom of monetary policymakers from direct political or governmental influence in the conduct of policy
Why is the central bank designed independantly and what drove this change
What are the two dimensions of central bank independence
What institutions have independence and to what extent
Arguments in favour of independence and against
What is inflation and how is it measured
What is inflation targeting and how is it achieved
The inflation target is achieved through periodic adjustments to the monetary policy rate (MPR)- The CB interest rate
What are the elements of inflation targeting
Advantages of inflation targeting
Disadvantages of inflation targeting
What are the tools of monetary policy implementation
What are policy instruments
Graph linkage between central banks tools, policy instruments intermediate targets and goals of monetary policy
What are the three criteria of choosing the policy instrument
Observability and measurability
Controllability
Predictable effect on policy goals
Describe observability and measurability
Describe controllability
Effective control over variable- short-term intrest rates better than reserve ,money aggregates
Describe the [predictable effect on policy goals
Most important
Empirical evidence- link between intrest rates and goals eg stable inflation is stronger than link between money aggregates and pie
What is the Taylor rule
Can the feds behaviour be modelled can an equation replicate the feds actions overtime
Yes, the Taylor rule
What does the Taylor rule attempt to do
What should the monetary policy rate(feds funds rate i) be set to equal to
What is the Taylor principle
Taylor principle example
Deviations from Taylor principle
What are the monetary policy lessons from the global financial crisis
What is quantitive easing (unconventional monetary policy)
When is it largely implemented
What is the QE strategy and examples
What are the effects of QE
Disadvantages of QE
What is an asset bubble and what are the two types
How do you identity asset bubbles
Should central banks respond to bubbles
What is the problem of using interest rates to restrain asset Bubbles
What policy is considered more appropriate to respond to asset bubbles
For instance if you use macroprudential policy to solve asset bubbles ….
What should regulation aim to do
Note 
Flashcard (21)