The Balance-Sheet Adjustment Process and the Effectiveness of Monetary Policy The second aspect with regard to the policy response concerns the effectiveness of monetary policy.
A few participants expressed uncertainty about the efficacy of monetary policy in current circumstances but disagreed on the implications for future policy..
記録的な低金利により,将来の景気後退における金融政策の有効性に懸念が生じている。
Record low interest rates have led to concerns about the potency of monetary policy in future recessions.
Nonetheless, there remain many issues to be assessed before evaluating whether the issuance of central bankdigital currencies could contribute to enhancing the effectiveness of monetary policy and financial stability.
In order to maintain the efficacy of monetary policy amid the progress of marketization, it becomes even more necessary to win public understanding of and confidence in the central bank's economic outlook and the thinking behind its monetary policy management.
For instance, in terms of monetary policy, academia, in principle, argues that CBDCs should bear interest-- even negative interest rates in some cases--as that could increase the effectiveness of monetary policy.
Indeed, there have emerged many payment instruments in this category such as checks andcredit cards, but the effectiveness of monetary policy has not substantially been affected by them.
Even during times of a crisis, if central banks take time-inconsistent policy measures, this could rather have negative effects on confidence in the central bank,and as a result reduce the effectiveness of monetary policy.
Mervyn King, Governor of the Bank of England,has referred to this phenomenon, in which the effectiveness of monetary policy is enhanced by movements in market interest rates that considerably exceed those in policy rates, as the"Maradona theory of interest rates.
If such credibility were to falter, interest rates would rise substantially,undermining the effectiveness of monetary policy as well as increasing the loan burden on individuals and firms, and inflicting damage on the business conditions of financial institutions with JGB holdings.
They therefore concluded that in order to enhance the effectiveness of monetary policy and put the economy back on a sustainable growth path, it was crucial that firms and financial institutions disposed of their nonperforming assets drastically, but downward pressure on the economy arising from this process would warrant attention.
In any event, transparency, which is one of the keywords of the new Bank of Japan Law, is not only an important responsibility for a central bank which was given independence under the framework of democracy,but also has significance in increasing the effectiveness of monetary policy.
Lastly, the liberalization of interest rates will strengthen the function of interest rates to guide the allocation of funds, and, consequently, investments will become more sensitive to fluctuations in interest rates,which in turn will increase the effectiveness of monetary policy.
The Bank judged it better to present a condition in terms of an inflation goal, rather than specifying the timing of an exit from monetary easing to gain a greater"credibility of commitment," andconsequently more effectiveness of monetary policy, given the high uncertainty surrounding the economic and price outlooks in Japan at this juncture.
The background to such moves is that(1) the real interest rate neutral to economic activity, or the natural rate of interest, has been on a declining trend in many advanced economies in recent years, mainly reflecting a decrease in the potential growth rate and a constant excess of funds, and(2)difficulties in enhancing the effectiveness of monetary policy under such circumstances have been taken into consideration.
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