We introduce intermediation frictions into the classical monetary model with fully flexible prices. Trade in financial assets happens through intermediaries who bargain over a full set of state-contingent claims with their customers. Monetary policy is redistributive and affects intermediaries’ ability to extract rents; this opens up a new channel for transmission of monetary shocks into rates ...

The paper evaluates the distributional effects of conventional and unconventional monetary policies for the USA. The distributional effects are evaluated for the overall impact on the income distribution, using Gini index. The paper also assesses the effects of conventional and unconventional monetary policies on the different parts of income distribution, employing corresponding percentile rat...

The last fteen years have seen a remarkable revolution in both the conduct of and the common understanding of monetary policy around the world. This revolution has encompassed instruments, with an increased emphasis on transparency about short and medium run central bank policy planning and decreased emphasis on intermediate targets such as monetary aggregates. This revolution has also encompas...

In recent decades, the declarations of “independent” central banks and the conduct of monetary policy have been assigned an ever increasing role in the pursuit of economic and financial stability. This is curious since there is, in practice, no body of scientific knowledge (evidence based beliefs) solid enough to have ensured agreement among central banks on the best way to conduct monetary pol...

In May 2000, the Treasurer/Minister of Finance invited me to review the operation of monetary policy in New Zealand and provided me with the Terms of Reference. In undertaking the review, I have read the wide range of submissions provided to me and have met with a number of submitters and other interested parties. I visited New Zealand for two weeks in November 2000 in order to observe the oper...

FREQUENTLY CITED THEORETICAL framework for the conduct of monetary policy consists of a policy instrument, an intermediate policy target and a long-run policy objective. The policy instrument is a lever which the central bank can manipulate to achieve its intermediate target. Possible choices for the policy instrument include the quantity of bank reserves, the monetary base (hank reserves plus ...

When he wrote this article, Ted Crone was a vice president and economist in the research Department of the Philadelphia Fed and head of the regional and microeconomics section. he has since retired. this article is available free of charge at www.philadelphiafed.org/econ/br/index. lthough there is only one national monetary policy, that does not mean that monetary policy does not affect some re...

This paper examines under what conditions fiscal policy in the form of government spending should contribute to macroeconomic stabilisation. To this end optimal fiscal targeting rules minimising the microfounded social loss are examined in the following settings. Firstly, for the benchmark New Keynesian model, where monetary policy is unconstrained, a neutrality result for fiscal obtains: fisca...

This paper reviews the state of the debate over rules versus discretion in monetary policy, focusing on the role of economic research in this debate. It shows that proposals for policy rules are largely based on empirical research using economic models. The models demonstrate the advantages of a systematic approach to monetary policy, though proposed rules have changed and generally improved ov...

In May 2000, the Treasurer/Minister of Finance invited me to review the operation of monetary policy in New Zealand and provided me with the Terms of Reference. In undertaking the review, I have read the wide range of submissions provided to me and have met with a number of submitters and other interested parties. I visited New Zealand for two weeks in November 2000 in order to observe the oper...