ABSTRACT
The authors of this chapter were asked to provide a ‘critical assessment of the monetary policy operating frameworks in East Asia’ in relation to ‘best practices and principles’. It is generally not easy, however, nor even appropriate, to be critical in this field of monetary policy. There are many ways to implement monetary policy. These may differ considerably in terms of the interest rates that are the focus of policy, the range of instruments employed, the frequency of operations, the spectrum of counterparties and other technical elements. Such differences reflect a mixture of historical factors and different views on the fine balance between the pros and cons of the various choices. At the end of the day, however, the question is whether the central bank is able to convey its policy signals with the desired degree of clarity and to influence short-term rates with the desired degree of accuracy. On these criteria, the frameworks in Indonesia, Korea, Malaysia and Thailand seem to do the job.
