For monetary policymakers worldwide, developing a practical understanding of how monetary policy transmits to the economy is a day-to-day challenge. The data such policymakers have is imperfect, the maps they use are continually redrawn. With such uncertainty, understanding this complicated issue is rarely straightforward. This book, a collaboration between some of the finest minds working on monetary theory in the world, helps to provide a foundation for understanding monetary policy in all its complex glory. Using models, case studies and new empirical evidence, the contributors to this book help readers on many levels develop their technical expertise. Students of macroeconomics, money and banking and international finance will find this to be a good addition to their reading lists. At the same time, policymakers and professionals within banking will learn valuable lessons from a thorough read of this book's pages.

Using firm-level data for approximately 1,000 bank and nonbank financial institutions in 22 countries over the past 15 years we study the impact of prolonged monetary policy easing on risk-taking behavior. We find that the leverage ratio, as well as other measures of firm-level vulnerability, increases for banks and nonbanks as domestic monetary policy easing persists. Cross-border effects are also notable. We find effects of roughly similar magnitude on foreign financial sector firms when the U.S. eases policy. Results appear robust to a variety of specifications, and to be non-linear, with risk-taking behavior rising most quickly at the onset of monetary policy easing.

Since the financial crisis of 2008-09, central bankers around the world have been forced to abandon conventional monetary policy tools in favour of unconventional policies such as quantitative easing, forward guidance, lowering the interest rate paid on bank reserves into negative territory, and pushing up prices of government bonds. Having faced a crisis in its banking sector nearly a decade earlier, Japan was a pioneer in the use of many of these tools. Unconventional Monetary Policy and Financial Stability critically assesses the measures used by Japan and examines what they have meant for the theory and practice of economic policy. The book shows how in practice unconventional monetary policy has worked through its impact on the financial markets. The text aims to generate an understanding of why such measures were introduced and how the Japanese system has subsequently changed regarding aspects such as governance and corporate balance sheets. It provides a comprehensive study of developments in Japanese money markets with the intent to understand the impact of policy on the debt structures that appear to have caused Japan’s deflation. The topics covered range from central bank communication and policymaking to international financial markets and bank balance sheets. This text is of great interest to students and scholars of banking, international finance, financial markets, political economy, and the Japanese economy.

Using the near universe of online vacancy postings in the U.S., we study the interaction between labor market power and monetary policy. We show empirically that labor market power amplifies the labor demand effects of monetary policy, while not disproportionately affecting wage growth. A search and matching model in which firms can attract workers by either offering higher wages or posting more vacancies can rationalize these findings. We also find that vacancy postings that do not require a college degree or technology skills are more responsive to monetary policy, especially when firms have labor market power. Our results help explain the “wageless” recovery after the 2008 financial crisis and the flattening of the wage Phillips curve, especially for the low-skilled, who saw stagnant wages but a robust decline in unemployment.

Monetary and fiscal Policy : Present successes and future problems, 3rd report of session 2003-04, Vol. 2: Evidence

This book reviews the historical evolution of U.S. monetary policy, and then uses various methods such as mathematical models and econometric analysis to study the impact of U.S. monetary policy adjustments on the domestic economy and the spillover effects on the world economy. Finally, it summarizes the challenges faced by the Chinese economy in the post financial crisis era and proposes relevant countermeasures and suggestions for China to respond to U.S. monetary policy adjustments.

"A Prescription for Monetary Policy," originally published in 1976, contains the proceedings from a series of seminars. The seminars addressed the question, "How should the Federal Open Market Committee (FOMC) make monetary policy?" The need to carefully reexamine this question gained in urgency as the economic distress story of the mid-1970s unfolded. In recognition of the unsatisfactory state of the economy, a major Federal Reserve System research program was launched under the auspices of the FOMC?s Committee on the Directive. The study?s objective was to produce for the FOMC?s consideration a set of recommendations on how to improve the execution of monetary stabilization policy.

This handbook explains the development and implementation of monetary policy. It examines theories and issues related to the preservation of economic activity and explores why the preservation of economic stability is a principal goal of public policy.

We examine the effects of unconventional monetary policy (UMP) events in the United States on asset price risk using risk-neutral density functions estimated from options prices. Based on an event study including a key exchange rate, an equity index, and five commodities, we find that “tail risk” diminishes in the immediate aftermath of UMP events, particularly downside left tail risk. We also find that QE1 and QE3 had stronger effects than QE2. We conclude that UMP events that serve to ease policies can help to bolster market confidence in times of high uncertainty.