Banku zentraleko jarduerak eta interes-tasako politika

A Discussion of Central Bank Operations and Interest Rate Policy

Warren Mosler and Phil Armstrong

(https://gimms.org.uk/2019/02/24/central-bank-operations-interest-rate-policy/)

Full Article

Lapurpena

With floating exchange rate policies, central banks target policy interest rates – prices – rather than any monetary aggregate. The narrative favoured by central banks and academics is that of the central bank adjusting the quantity of reserves supplied in order to keep market rates in line with their target rate. This implies that, in the US case, for example, the Fed varies the quantity of reserves in order to achieve its interest rate target. However, we argue in favour of a reversed causality vis-à-vis orthodox analysis and contend that rather than adjusting the supply of reserves to meet its policy rate, as the monopoly issuer of reserves in a floating exchange rate regime, the central bank, in practice, acts as the price-setter for the level of reserves demanded by the banking system.

Ondorioa (Conclusion)

Events of the past decade have highlighted the importance for policy makers, investors, academics, and voters of developing a richer understanding of the operation of the monetary system in general and the determination of interest rates in particular. We welcome the acceptance on the part of many economists, including those outside Post-Keynesianism, of the endogenous nature of the money supply. Central bankers have also acknowledged the operational necessity of targeting interest rates rather than money supply growth. However, we would argue that the process of deepening understanding is not yet complete and further requires the recognition that, as the monopoly issuer of reserves in a floating exchange rate regime, supply is demand determined with CBs controlling price. That is, CB action under a floating exchange rate regime is best understood as that of a price-setter of the reserves demanded. We argue in favour of a reversed causality vis-à-vis orthodox analysis which would have applicability in a fixed exchange rate regime, which is in fact reserve constrained by design. (A full analysis of fixed exchange rate dynamics, however, is beyond the scope of this article¹) We also contend that its role as monopoly supplier also gives the CB the ability to control the full spectrum of long term risk-free rates and that the extent of market influence on the determination of the shape of the yield curve is always, ultimately, under the control of the CB.