Seperation of monetary and financial stability issues
Economist’s View links to a post on the Vox EU site by Hans Gersbach. At the start of the post Mark Thoma states:
I have argued many times that the Fed should have two roles. It should conduct monetary policy, and it should be the primary regulator of the financial system. However, not everyone agrees. When I was at the What’s Wrong with Modern Macro Conference in Munich recently, I met Hans Gersbach — we were on a panel together — and he passes along his argument that monetary policy and banking regulation should be conducted by separate bodies
So the disagreement here is not about the two instruments for central banks – in fact in the monetary policy community there is a strong degree of agreement regarding these two roles. The disagreement stems from who should be in charge of the instruments – should we have one authority controlling both, or separate authorities.
This is a fascinating issue, and I have previously said I am on the side of SEPARATING.
My reasoning is that separating “monetary” and “financial stability” issues is essential in order to create transperancy in the public regarding policy movements. If we can make sure that changes in the Bank’s cash rate are related to “monetary” policy and changes in prudential regulation/settings are related to “financial stability”. By doing this, the actions/intentions of the individual institutions are more obvious and are more likely to anchor expectations – which is the point.
Of course monetary and financial stability policies, and these instruments (interest rates and prudential policy) are heavily related. But of course, we know that monetary policy and fiscal policy is as well. The fact is that in order to signal policy and control expectations we NEED individual instruments to be targeted at individual variables – and having separate institutions helps to clarify this fact.
Isn’t NZ too small to separate those roles?
RBNZ did a pretty good job of doing both at once?
cheers
Bernard
@Bernard Hickey
No. They do both separately under the same roof now – they just need to be more explicit about the difference between the two. Otherwise we get mixed signals.
We don’t necessarily even need two separate institutions in a country as small as NZ – as long as we have clear and transparent operational separation. Of course, we don’t have that now – which is why we get talk of “financial stability” in monetary policy meetings …
This is a fascinating issue, and I have previously said I am on the side of SEPARATING.
Absolutely right and I’m on the side of separating the two as well.
Beyond transparency, removing some of the ability for political gain over public benefit is the reason. When each is evaluated according to its own merits, game playing is reduced, and the public’s likelihood of being used as a pawn diminishes.
@how to learn chinese
Yeah, it is a very interesting issue. Like you, I’m also on the side of separating. 🙂
What about achieving financial stability by not messing around with monetary policy? In other words having a set amount of money that is backed by a real and finite commodity?
With this blog I intend to share some interesting, real-life experiences that I’ve had over the years as a project manager and an agile coach, hoping one day ‘my two cents’, would even worth a dollar.
OperationsCrossing displays all kinds of operations jobs that deal with the process of producing and distributing products and services along with its functioning. The site lists all those positions that are concerned with inventory management, resource management, supply chain management, logistics management, and industrial engineering. It lists every position that requires controlling and assurance of the quality of all the internal processes along with analyzing or improving the efficiency of these processes. OperationsCrossing users form an exclusive community. They benefit from a wide variety of jobs as well as other resources, including news, career-related articles, profiles, and more.
OperationsCrossing displays each and every type of operations job opening in the nation. These include various positions, such as business analyst, inventory manager, trafficking specialist, shift manager, evaluator, operations manager, supply chain analyst, material quality manager, samples coordinator, production planner, production technician, functional analyst, corporate operations manager, project manager, process engineer, knowledge engineer, credit risk manager, quality engineer, and the list goes on.Additionally, our job listings are updated by the hour, making OperationsCrossing the most current site on the web. We visit more than 10,000 websites each day in search of jobs. You will definitely benefit from our extensive research, which allows us to post more jobs than any other operations-career site. Try our site http://www.operationscrossing.com and get more information…
$100k president operations
analyst network operations
center management operations
chief hotel operations
development global operations
district engineer operations
electronics development operations
engineer back operations
executive system operations
form resume operations
global projectleader operations
hazard pass operations
hospitality managing operations
industry jobs operations
jobs hazard operations
management field operations
managers edison operations
market chief operations
office 100k operations
officer service operations
plant recruitment operations
procurement president operations
projectleader network operations
purchasing management operations
resource hotel operations
risk global operations
service engineer operations
system director operations
100k jobs $100k chief
100k jobs back analyst
100k jobs center system
100k jobs chief salary
100k jobs development resource
100k jobs district proposal
100k jobs electronics procurement
100k jobs engineer pass
100k jobs field office
100k jobs function managing
100k jobs grant management
100k jobs high industry
100k jobs hotel hazard
100k jobs jamaica function
100k jobs management executive
100k jobs managers electronics
100k jobs market director
100k jobs office chief
100k jobs operations back
100k jobs pass writing
100k jobs president service
100k jobs project resume
100k jobs proposal purchasing
100k jobs recruitment procurement
100k jobs resume pass
100k jobs salary office
100k jobs sourcing managing
100k jobs writing management
All available 🙂