What Monetary Policy Operational Frameworks in the New Financial Environment? A Comparison of the US Fed and the Eurosystem Perspectives, 2007–2019. Issue 4 (2nd October 2019)

• Record Type: Journal Article
• Authors: Grossmann-Wirth, Vincent
• Is Part Of: International journal of political economy. Volume 48:Issue 4(2019)
• Page Start: 336
• Page End: 352
• Publication Date: 2019-10-02
• Subjects: monetary policy -- monetary policy operational frameworks -- Federal Reserve -- Eurosystem -- floor -- corridor -- liquidity regulation; E50 -- E52 -- E58; Political science -- Periodicals; Science politique -- Périodiques; Political science; Internationale betrekkingen; Economie; Periodicals; Electronic journals; 320
• DOI: 10.1080/08911916.2019.1693162
• Languages: English
• ISSNs: 0891-1916

Abstract

Abstract: While it is too early to draw any firm conclusions regarding the optimal design of long-term monetary policy operational frameworks, the decision taken by the US Fed in January 2019 to continue operating with ample reserves in a so-called floor(s) system, rather than returning to a pre-crisis-type corridor, provides an interesting case study. Our take-away from comparing the Fed's and the Eurosystem's perspectives is that, in some contrast to the apparent simplicity of a floor system, both configurations actually require a close monitoring of the money market, some balance-sheet actions and unavoidable policy choices, in particular regarding the elasticity of liquidity provision.