Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152806
Authors: 
Bindseil, Ulrich
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 372
Abstract: 
Before 1914, there was little doubt that central bank policy meant first of all control of short term interest rates. This changed dramatically in the early 1920s with the birth of “reserve position doctrine” (RPD) in the US, according to which a central bank should, via open market operation, steer some reserve concept, which would impact via the money multiplier on monetary aggregates and ultimate goals. While the Fed returned to an unambiguous steering of short term interest rates only in the 1990s, for example the Bank of England never adopted RPD. This paper explains the astonishing rise and fall of RPD. The endurance of RPD is explained by a symbiosis of central bankers who may have partially sympathised with RPD since it masked their responsibility for short term interest rates, and academics who were too eager to simplify away some key features of money markets and central bank operations.
Subjects: 
instruments’ choice problem
monetary policy implementation
monetary policy instruments
operational target of monetary policy
JEL: 
E43
E52
B22
Document Type: 
Working Paper

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