They are therefore sometimes used in the absence of well-developed financial markets. These transfers can, in principle, yield similar results as genuine open market operations. Alternatively, some countries use transfers of government deposits between the central bank’s books and the commercial banks as the main monetary policy instrument. The underlying financial instrument for open market interventions can be either private, government, or central bank securities. Typically, in an indirect monetary policy framework, open market operations are the central bank’s main instrument of monetary policy, supported by other instruments such as central bank credit to commercial banks and reserve requirements. One particular area where coordination is needed at the operational level between monetary and fiscal authorities is the selection and use of a financial instrument to conduct the central bank’s open market interventions. Operational autonomy itself is an indispensable building block on the road to the central bank’s institutional autonomy, which is now generally considered as desirable to help in achieving the central bank’s main policy goal, price stability.

the ability to control the growth of its balance sheet, enabling it to achieve its policy goals effectively and neutralize any movements that may interfere with their pursuance-may be impaired. Without such coordination, the central bank’s operational independence-i.e. This new situation calls for close coordination between monetary and fiscal authorities. Financial liberalization in general and the adoption of indirect instruments of monetary policy in particular, have a major impact on the relationship between the government and the central bank at both the institutional and operational level.Īt the operational level, the activities of the central bank and the government (or treasury in particular) become more intertwined than under a system of direct, administrative monetary controls.

Cd interest rates in the philippines