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Monetary Policy Strategies in the Asia and Pacific Region: What Way Forward?

Author

Listed:
  • Filardo, Andrew

    (Asian Development Bank Institute)

  • Genberg, Hans

    (Asian Development Bank Institute)

Abstract
Monetary policy frameworks in the Asia and Pacific region have performed well in the past decade as judged by inflation outcomes. We argue that this is due to three principal factors: (i) central banks have focused on price stability as the primary objective of monetary policy, (ii) institutional setups have been put in place that are supportive of the central banks' abilities to carry out their objectives, and (iii) economic policies in general have been supportive of the pursuit of price stability, in particular the adoption of prudent fiscal policies that have reduced concerns of fiscal dominance. The financial systems in the region have also held up well in the face of the current crisis, notwithstanding more adverse liquidity conditions in several markets and pressures on certain exchange rates that spilled over from the West. It may nevertheless be useful to ask whether changes in monetary policy frameworks should be contemplated. This paper concludes that: (i) for economies with well developed financial markets, there may be little value in using unconventional monetary policies in the absence of financial crises, because in normal times such policies are not likely to be effective and may further reduce the efficiency of the financial market; (ii) a good case can be made for elevating the role of the misalignment of asset prices (including exchange rates) and financial imbalances in the conduct of monetary policy; and (iii) financial stability should take on greater importance as an objective for public policy. Whether and how much of the financial stability objective should be assigned to the central bank is still an open question.

Suggested Citation

  • Filardo, Andrew & Genberg, Hans, 2010. "Monetary Policy Strategies in the Asia and Pacific Region: What Way Forward?," ADBI Working Papers 195, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0195
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    References listed on IDEAS

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    Cited by:

    1. Morgan, Peter J., 2012. "The role of macroeconomic policy in rebalancing growth," Journal of Asian Economics, Elsevier, vol. 23(1), pages 13-25.
    2. Valera, Harold Glenn A. & Holmes, Mark J. & Hassan, Gazi M., 2017. "How credible is inflation targeting in Asia? A quantile unit root perspective," Economic Modelling, Elsevier, vol. 60(C), pages 194-210.
    3. Sherika Antao & Ajit Karnik, 2022. "Bank Performance and Noninterest Income: Evidence from Countries in the Asian Region," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(3), pages 477-505, September.
    4. Chakraborty, Lekha, 2020. "Macroeconomic Policy Coherence for SDG 2030: Evidence from Asia Pacific," Working Papers 20/292, National Institute of Public Finance and Policy.
    5. Solikin M. Juhro & Miranda S. Goeltom, 2013. "The Monetary Policy Regime In Indonesia," Working Papers WP/17/2013, Bank Indonesia.
    6. Alice Y. Ouyang & Ramkishen S. Rajan, 2016. "Does Inflation Targeting in Asia Reduce Exchange Rate Volatility?," International Economic Journal, Taylor & Francis Journals, vol. 30(2), pages 294-311, June.
    7. Runchana Pongsaparn & Panda Ketruangroch & Dhanaporn Hirunwong, 2012. "Monetary Policy conduct in Review: The Appropriate Choice of Instruments," Working Papers 2012-05, Monetary Policy Group, Bank of Thailand.

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    More about this item

    Keywords

    asian monetary policy frameworks; pacific monetary policy frameworks; future changes; monetary policy strategies; asia monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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