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) - Grossmann-Wirth, Vincent
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.