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A New EraA Study of the Monetary Policy Framework with Mutually Supportive Price- and Quantity-Based Tools

A New Era: A Study of the Monetary Policy Framework with Mutually Supportive Price- and... [After the world financial crisis in 2008, the use of quantity- and price-based tools for regulative purposes under certain circumstances has been a choice by many central banks. Even after the monetary policy reverts to the normal state, some countries have started to lay emphasis upon the combination of quantity- and price-based tools. This chapter, by building the Dynamic Stochastic General Equilibrium (DSGE) model encompassing residents, non-financial enterprises and the government, compares and analyzes the effect of monetary policy tools in six combinations of price- and quantity-based tools. The empirical research has shown that mixed policy tools are better than single policy tools. If more attention is paid to gross domestic product (GDP) targets, regulation using primarily quantity-based tools supplemented by price-based tools (QP) is more effective; if more attention is paid to the level of inflation, then middle- and long-term regulation using primarily price-based tools supplemented by quantity-based tools (LPQ) is more effective; if the focus is on employment targets, short-term regulation using primarily price-based tools (SPQ) supplemented by quantity-based tools is more effective.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

A New EraA Study of the Monetary Policy Framework with Mutually Supportive Price- and Quantity-Based Tools

Editors: He, Dexu; Wang, Chaoyang
A New Era — Aug 31, 2018

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Publisher
Springer Singapore
Copyright
© The Editor(s) (if applicable) and The Author(s) 2019. Based on a translation from the Chinese language edition: 新时代: 中国经济全球化 Copyright © Social Sciences Academic Press, 2018 All Rights Reserved
ISBN
978-981-10-8356-3
Pages
113 –135
DOI
10.1007/978-981-10-8357-0_5
Publisher site
See Chapter on Publisher Site

Abstract

[After the world financial crisis in 2008, the use of quantity- and price-based tools for regulative purposes under certain circumstances has been a choice by many central banks. Even after the monetary policy reverts to the normal state, some countries have started to lay emphasis upon the combination of quantity- and price-based tools. This chapter, by building the Dynamic Stochastic General Equilibrium (DSGE) model encompassing residents, non-financial enterprises and the government, compares and analyzes the effect of monetary policy tools in six combinations of price- and quantity-based tools. The empirical research has shown that mixed policy tools are better than single policy tools. If more attention is paid to gross domestic product (GDP) targets, regulation using primarily quantity-based tools supplemented by price-based tools (QP) is more effective; if more attention is paid to the level of inflation, then middle- and long-term regulation using primarily price-based tools supplemented by quantity-based tools (LPQ) is more effective; if the focus is on employment targets, short-term regulation using primarily price-based tools (SPQ) supplemented by quantity-based tools is more effective.]

Published: Aug 31, 2018

Keywords: Price-based tools; Quantity-based tools; Mixed policy tools; Monetary policy framework

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