Monetary Policy in East Asia: Implementation Matters
When monetary policy was still largely confined to the setting of interest rates and conventional open market operations, monetary policy implementation could be considered a technical issue beyond the scope for academic analysis. This has changed with th
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Monetary Policy in East Asia: Implementation Matters Frank Rövekamp, Moritz Bälz, and Hanns Günther Hilpert
Abstract When monetary policy was still largely confined to the setting of interest rates and conventional open market operations, monetary policy implementation could be considered a technical issue beyond the scope for academic analysis. This has changed with the advent of the so-called unconventional monetary policies such as Quantitative Easing (QE). The exact way of conducting such policies has a huge influence not only on financial markets, but also on the real economy and on fiscal affairs. Meanwhile, central bank communication has proven to be a major factor for the efficiency of monetary policy paths, and in this field, too, success depends to a large degree on proper implementation.
The chapters in this book take a look at monetary implementation issues in various Asian economies. This widens the perspective for further areas, such as inflation targeting, exchange-rate policies and company-stock purchases by central banks. The case of the People’s Bank of China demonstrates that the smooth implementation of monetary policy may be infringed by governance issues. Experiences from the Bank of Korea show that Inflation Targeting faces fundamental challenges in communication. Exchange-rate management remains very important for smaller and open economies, such as those of Singapore and Taiwan; here skilful implementation has to assure the control of short-term speculative capital movements without F. Rövekamp (B) East Asia Institute, Ludwigshafen University of Business and Society, Rheinpromenade 12, 67061 Ludwigshafen, Germany e-mail: [email protected] M. Bälz Faculty of Law/Interdisciplinary Centre for East Asian Studies, Goethe University, Theodor-W.-Adorno-Platz 4, 60323 Frankfurt am Main, Germany e-mail: [email protected] H. G. Hilpert Research Division Asia, German Institute for International and Security Affairs (SWP), Ludwigkirchplatz 3-4, 10719 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 F. Rövekamp et al. (eds.), Monetary Policy Implementation in East Asia, Financial and Monetary Policy Studies 51, https://doi.org/10.1007/978-3-030-50298-0_1
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negatively affecting trade and direct investments. The boundaries of QE are tested in Japan, where the central bank not only purchases government bonds but also company stock. The potential side effects on corporate governance and stock market volatility may still unfold. The cases presented in this book underline the importance of the implementation aspect of monetary policy and point to the need for further research in this area. The achievement and preservation of price stability remain the primary goal of monetary policy. Ever since the global financial crisis of 2008/09, however, concerns about financial stability have also taken centre stage and the fighting of deflation, rather than inflation, has become the order of the day in the major economies. In this environment
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