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Monetary policy rules in practice: The case of Israel
International Review of Economics & Finance ( IF 3.399 ) Pub Date : 2021-06-19 , DOI: 10.1016/j.iref.2021.06.012
Sophia Kazinnik , David H. Papell

This paper presents a case study of how communication on monetary policy rules in Israel allows for discretionary deviations within a rule-like policy framework without impairment to central bank credibility. We quantitatively analyze a monetary policy rule that has described Bank of Israel policy formally since 2012 and informally since 2007. We demonstrate the value of a policy rule as a tool of communication and show how policymakers leverage this rule in times of economic uncertainty. We identify periods of discretionary deviation from the policy rule and show how communication on financial stability concerns derived from monthly interest rate announcements explains these deviations. Finally, we show how policymakers in Israel were able to anchor market expectations, even in times of great economic uncertainty. We assess how market expectations about the future path of the short-term interest rate respond both to communication related to the rule and exercised flexibility during the financial crisis. We use futures contracts on short term interest rates from the inter-bank market and find that monetary policy predictability improves in the period following the publication of this rule. We argue that policymakers in Israel were able to conduct monetary policy consistent with their main long-term objectives while maintain a high degree of transparency on assessments behind interest rate decisions.



中文翻译:

实践中的货币政策规则:以以色列为例

本文介绍了一个案例研究,说明以色列货币政策规则的沟通如何允许在类似规则的政策框架内任意偏离而不损害中央银行的可信度。我们定量分析了自 2012 年以来正式描述以色列银行政策并自 2007 年以来非正式描述的货币政策规则。我们展示了政策规则作为沟通工具的价值,并展示了政策制定者如何在经济不确定时期利用该规则。我们确定了与政策规则任意偏离的时期,并展示了从每月利率公告中得出的关于金融稳定问题的沟通如何解释这些偏离。最后,我们展示了以色列的政策制定者如何能够稳定市场预期,即使在经济存在巨大不确定性的时期。我们评估了市场对短期利率未来路径的预期如何对与规则相关的沟通和金融危机期间的灵活性做出反应。我们使用来自银行间市场的短期利率期货合约,发现货币政策的可预测性在此规则发布后的一段时间内有所提高。我们认为,以色列的政策制定者能够实施与其主要长期目标一致的货币政策,同时对利率决定背后的评估保持高度透明。我们使用来自银行间市场的短期利率期货合约,发现货币政策的可预测性在此规则发布后的一段时间内有所提高。我们认为,以色列的政策制定者能够实施与其主要长期目标一致的货币政策,同时对利率决定背后的评估保持高度透明。我们使用来自银行间市场的短期利率期货合约,发现货币政策的可预测性在此规则发布后的一段时间内有所提高。我们认为,以色列的政策制定者能够实施与其主要长期目标一致的货币政策,同时对利率决定背后的评估保持高度的透明度。

更新日期:2021-06-30
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