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Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Article
Publication date: 23 November 2010

Jessica Lassiter, Timothy O. Bisping and Joseph Horton

The purpose of this paper is to consider the difference in the development of the central bank in two states in transition from communism to capitalism and from being parts of the…

429

Abstract

Purpose

The purpose of this paper is to consider the difference in the development of the central bank in two states in transition from communism to capitalism and from being parts of the Soviet Union to being independent states.

Design/methodology/approach

Data and theoretical analysis were gathered from various sources in order to evaluate the approach to central banking taken by these two countries.

Findings

Substantial variations were found in the resulting monetary policies and rates of inflation which demonstrate the differences in the institutions developed and illustrate the importance of independence for the central bank.

Originality/value

The contrasting experience of Belarus and Estonia, both of which gained independence from the Soviet Union in 1991, provide examples of success and failure in this endeavor, thus providing valuable insight to those involved with transitioning economies.

Details

International Journal of Commerce and Management, vol. 20 no. 4
Type: Research Article
ISSN: 1056-9219

Keywords

Article
Publication date: 8 June 2010

Branka Mraović

This paper seeks to focus on the challenge posed by financial globalization before the traditional Westphalian model of monetary sovereignty, claiming that financial globalization…

Abstract

Purpose

This paper seeks to focus on the challenge posed by financial globalization before the traditional Westphalian model of monetary sovereignty, claiming that financial globalization of the world's markets leads to new forms of geopolitical rivalry among contemporary governments.

Design/methodology/approach

The paper sets the analytical framework for the study of a tripartite foundation of monetary sovereignty in money manager capitalism, consisting of currency associated with the instruments of its manipulation, which are the two largest independent macroeconomic players: the central bank and the state. This raises the issues of dual sovereignty in economy and the ways in which these entities use their sovereign powers on local and global levels.

Findings

Current growing interdependence of financial networks increases the number of choices in monetary issues and forces governments to make ever faster adjustments to the machinery of complex monetary instruments which not only facilitate transactions among very different and distant economies, but also obscure the transparency of decision making. The need to ensure, through the central bank's legislation, an independent status of central bankers with respect to politicians, implies that their work be effectively monitored by the public and the respective parliament.

Practical implications

The independence of central banks, which comprises goal independence, instrument independence and personal independence of the decision‐making body of a central bank, increases the accountability of central bankers and raises the issue of sanctions for their misbehavior.

Originality/value

Financial globalization has definitely raised the issue of redistribution of the authority of governments and non‐state agents. A clear hierarchy between currencies at the global level has dual consequences: first, it amplifies the unequal relationship between the leaders and the followers in global monetary circulation; second, global market forces ignore political borders and present a serious challenge for the monetary sovereignty of contemporary governments. Equally, the question of re‐formulation of the concept of a sovereign state is raised.

Details

Social Responsibility Journal, vol. 6 no. 2
Type: Research Article
ISSN: 1747-1117

Keywords

Book part
Publication date: 16 February 2006

Richard A. Werner

The popular rejection of the European constitution in France and the Netherlands triggered much debate in and around the European Central Bank (ECB) concerning the long-term…

Abstract

The popular rejection of the European constitution in France and the Netherlands triggered much debate in and around the European Central Bank (ECB) concerning the long-term viability of the euro. The region of European Monetary Union (EMU) member countries has suffered from economic strains for several years: while Germany has been in a severe economic downturn since 2001, and thus its government has implored the ECB to adopt more stimulatory monetary policy, other countries, such as Ireland and Spain, have been in the midst of an economic boom. With the prospect of a slowdown in the political process of forming a United States of Europe, a number of observers and policy-makers have begun to review the long-term viability of the European currency system. In early June 2005, politicians in Italy even publicly contemplated the possibility of leaving the euro-system and re-introducing their domestic currency, thus enabling Italy to conduct its own monetary policy, suitable for its own policy goals. Meanwhile, policy-makers in a large number of East European and Asian countries continue to favour joining the EMU and adopting the euro at the earliest possible date. Given the most recent events and discussions, and after several years of experience with the euro, it may be a suitable time to reconsider some of the potential benefits and disadvantages for new accession countries to join the euro system in the future.

Details

Emerging European Financial Markets: Independence and Integration Post-Enlargement
Type: Book
ISBN: 978-0-76231-264-1

Article
Publication date: 8 November 2011

Richard C.K. Burdekin, King Banaian, Mark Hallerberg and Pierre L. Siklos

The latest generation of research into macroeconomic policy has turned from more technical aspects of optimal control and expectations formation to consideration of the…

1187

Abstract

Purpose

The latest generation of research into macroeconomic policy has turned from more technical aspects of optimal control and expectations formation to consideration of the policymaking institutions themselves. More and more countries have moved towards greater degrees of central bank independence, including many developing economies as well the member countries of the European Central Bank. What still is not generally settled among economists is how to measure the stance of policy and the institutional features of the policymaking process. The purpose of this paper is to assess prevailing monetary and fiscal policies.

Design/methodology/approach

The paper takes the form of a review encompassing many different measurements of policy stance and policymaking processes. The authors begin with monetary policy followed by an analysis of central bank institutions. The next sections turn to fiscal policy and the need to adjust budget balance for the state of the business cycle. There is then a brief concluding section.

Findings

The authors show in this review that fiscal and monetary rules, and economists' understanding of them, have changed substantially over the years. While on one level there is greater consensus, there have been new questions raised in the process that leave plenty of room for further ongoing research in these key policy areas as well as the optimal design of the design of the monetary and fiscal institutions concerned.

Originality/value

The paper provides a review of the existing literature updated and applied with reference to recent events, including the global financial crisis.

Details

Journal of Financial Economic Policy, vol. 3 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Case study
Publication date: 20 November 2023

Adrian David Saville, Mluleki Shongwe and Amy Fisher Moore

On completion of the case study, students will understand the following learning objectives: the characteristics of quantitative easing (QE) and when it may be appropriate to…

Abstract

Learning outcomes

On completion of the case study, students will understand the following learning objectives: the characteristics of quantitative easing (QE) and when it may be appropriate to implement QE; how QE differs from a conventional bond purchasing programme; the impact of direct financing of the fiscus by the central bank on its independence; how the macro-economic and political environments affect and influence national economic policy; the difference between traditional and unconventional monetary policies and potential implications for an economy like South Africa. The learnings from this case study can be used in other global economic environments, particularly in emerging markets. This case study provides valuable insights into decision-making, institutional independence, policy coordination, deficit financing, causes and consequences of price inflation, risks relating to monetary instability and the correct application of monetary policy.

Case overview/synopsis

After the announcement of the COVID-19-related lockdown in March 2020 and the subsequent slow-down of economic activity in South Africa, the South African Reserve Bank (SARB) had to consider appropriate macro-economic tools to ensure both price and financial stability in South Africa. The macro-economic policy tools had to be considered in light of the South African economic context, which included acknowledgement of South Africa’s debt crisis and slow economic growth. The central bank responded by introducing the following measures: reducing interest rates to a record low of 3.5% to give consumers financial relief and to promote spending in the economy; purchasing government bonds in the secondary markets to stabilise financial markets; facilitating the loan guarantee scheme that was aimed at providing financial relief to small- and medium-sized enterprises; relaxing the capital and liquidity adequacy requirements that commercial banks are required to meet; and ensuring availability of liquidity to banks through facilities such as the weekly repo auctions. However, despite introducing these interventions, the SARB faced calls from politicians, analysts and academics to do more. Various commentators argued that the SARB could introduce QE and directly finance government spending by purchasing government bonds. Some commentators argued that the reluctance of the SARB to pursue these suggestions was a result of the close alignment and relationship between the SARB and National Treasury. The dilemma faced by Governor Lesetja Kganyago of the SARB was threefold, namely, whether it was appropriate for the central bank to pursue the initiatives and, if so, whether the bank could pursue them without compromising its independence, and if the introduction of those initiatives would not adversely affect the ability of the central bank to fulfil its mandate of price stability and financial stability. In this regard, the governor and his executive team were required to consider the long-term implications of introducing the initiatives on consumer price inflation, independence of the SARB and the appropriate use of monetary policy tools to fulfil the central bank’s mandate. But the question was: What policies should the governor favour?

Complexity academic level

This case study is based on various macro-economic theories. Therefore, it would be useful to teach this case study in macro-economic courses in the following programmes: master’s in business administration, bachelor of commerce, bachelor of economic sciences and business science studies, as well as on executive education programmes, which consider macro-economic policy. In general, students who undertake economics, business and general management, finance, legal, commerce and banking studies could learn from this case study.

Supplementary materials

Teaching notes are available for educators only.

Subject code

CSS 3: Entrepreneurship.

Details

Emerald Emerging Markets Case Studies, vol. 13 no. 4
Type: Case Study
ISSN: 2045-0621

Keywords

Article
Publication date: 30 May 2019

Abel Mawuko Agoba, Joshua Yindenaba Abor, Kofi Osei, Jarjisu Sa-Aadu, Benjamin Amoah and Gloria Clarissa Odortor Dzeha

The purpose of this paper is to primarily investigate the ability of independent central banks (central bank independence (CBI)) to improve fiscal performances in Africa…

Abstract

Purpose

The purpose of this paper is to primarily investigate the ability of independent central banks (central bank independence (CBI)) to improve fiscal performances in Africa, accounting for election years, and also to examine whether the effectiveness of CBI in improving fiscal performance is enhanced by higher political institutional quality.

Design/methodology/approach

Using recent CBI data from Garriga (2016) on 48 African countries, 90 other developing countries and 40 developed countries over the period 1970–2012, the authors apply a two stage system GMM with Windmeijer (2005) small sample robust correction estimator to examine the impact of CBI and elections on fiscal policy in Africa, other developing countries and developed countries.

Findings

The authors provide evidence that unlike in other developing countries and developed countries, CBI does not significantly improve fiscal performance in Africa. However, the effectiveness of CBI in improving fiscal performance in Africa is enhanced by higher levels of institutional quality. Although elections directly worsen fiscal performance in Africa, institutional quality enhances CBI’s effect on improving fiscal performance in election years across Africa, other developing countries and developed countries.

Practical implications

The findings of the study are significant as they provide insight into the benefits of having strong institutions to complement independent central banks in order to control fiscal indiscipline in election years.

Originality/value

The study is the first among the studies of CBI-fiscal policy nexus, to measure fiscal policy using net central bank claims on government as a percentage of GDP. In addition to the use of fiscal balance, this study also uses cyclically adjusted fiscal balance as a measure of fiscal policy. This is a critical channel through which independent central banks can constrain government spending. It also compares findings in Africa to other developing countries, noting some differences.

Details

International Journal of Emerging Markets, vol. 14 no. 5
Type: Research Article
ISSN: 1746-8809

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

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