Monetary Strategies from the Perspective of Intermediate Objectives

Abstract

Central bank can apply different kinds of monetary strategies. This paper analyses monetary strategy from the perspective of intermediate objectives. Right strategy should help to fulfill targeted goals. However, it is not easy to choose right strategy in right moment under certain economic conditions. This paper summarizes basic principles, advantages, and disadvantages of four main strategies. Thus, it should simplify choice of the optimal one. Some practical aspects are explained through experience of several central banks and especially through example of the National Bank of Slovakia that applied gradually different strategies. These modifications were influenced by specific evolution of Slovak economy that has been typical for countries in transition. Thus, its experience can serve other countries that are in the beginning of transition process.

Key words: Monetary strategy, Implicit inflation targeting, Explicit inflation targeting, Monetary targeting, Exchange rate targeting, Central bank.
JEL: E50, E52, E58.