Monetary targeting in practice : the German experience

From the mid-seventies on, the central banks of most major industrial countries switched to monetary targeting. The Bundesbank was the first central bank to take this step, making the switch at the end of 1974. This chan
From the mid-seventies on, the central banks of most major industrial countries switched to monetary targeting. The Bundesbank was the first central bank to take this step, making the switch at the end of 1974. This changeover to monetary targeting was due to the difficulties which the Bundesbank - like other central banks - was facing in pursuing its original strategy, and whichcame to a head in the early seventies, when inflation escalated. A second factor was the collapse of the Bretton Woods system of fixed exchange rates, which created the necessary scope for national monetary targeting. Finally, the advance of monetarist ideas fostered the explicit turn towards monetary targets, although the Bundesbank did not implement these in a mechanistic way. Whereas the Bundesbank has adhered to its policy of monetary targeting up to the present, nowadays monetary targeting plays only a minor role worldwide. Many central banks have switched to the strategy of direct inflation targeting. Others favour a more discretionary approach or a policy which is geared to the exchange rate. In the academic debate, monetary targeting is often presented as an outdated approach which has long since lost its basis of stable money demand. These findings give riseto a number of questions: Has monetary targeting actually become outdated? Which role is played by the concrete design of this strategy, and, against this background, how easily can it be transferred to European monetary union? This paper aims to answer these questions, drawing on the particular experience which the Bundesbank has gained of monetary targeting. It seems appropriate to discuss monetary targeting by using a specific example, since this notion is not very precise. This applies, for example, to the money definition used, the way the target is derived, the stringency applied in pursuing the target and the monetary management procedure.
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Metadaten
Author:Peter Schmid
URN:urn:nbn:de:hebis:30-9257
Parent Title (German):Institut für Kapitalmarktforschung (Frankfurt am Main): CFS working paper series ; No. 1999,03
Series (Serial Number):CFS working paper series (1999, 03)
Contributor(s):Jürgen von Hagen
Document Type:Working Paper
Language:English
Year of Completion:1999
Year of first Publication:1999
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/05/25
SWD-Keyword:Deutschland; Geldmengensteuerung; Geldmengenziel
HeBIS PPN:197807135
Contributor:Hagen, Jürgen von (Koreferent)
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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