Challenges in Monetary Policy
An Executive Seminar for Macroeconomic Policymakers
(November 1-2, 2011)

Hitotsubashi University and the International Monetary Fund’s Regional Office for Asia and the Pacific (OAP) jointly hosted a seminar for senior policy makers from Asia on the recent challenges facing monetary policy. The seminar’s aim was to bring together senior macroeconomic policy makers from across Asia to learn about and to discuss theoretical and practical aspects of policy challenges faced by central banks. The main issues that were considered were monetary policy responses in financial crisis, monetary policy for price stability and the inflation targeting framework, and the monetary policy role in financial stability.
The Seminar was attended by 14 overseas participants from 9 countries representing 12 institutions, including three Central Bank Deputy Governors, a Commissioner of Financial Services Commission and a President of Deposit Insurance Corporation. Senior officials from the Bank of Japan, the Japanese Ministry of Finance, and representatives from two foreign central bank representative offices in Tokyo also participated in the Seminar.

Summary of Discussions
In Session 1, Stijn Claassens (Assistant Director, Research Department) from the IMF reviewed the monetary responses during crisis, and argued that the responses, while unusual from a traditional monetary policy viewpoint, were both necessary and effective, albeit not without costs. He noted that the spillover effects were large but not unprecedented, and that macro-prudential and capital flow management approach may be deployed to limit the risks. He also focused on the need to develop a broader range of macro-prudential toolkit to ensure financial stability.

Much of the discussions in Session 1 revolved around the spillover effects, with participants variously expressing the need for foreign exchange provision during crisis, the limited domestic effect of monetary policy beyond the ‘acute pain’ stage of crisis as opposed to the larger spillover effects, and the limited ability of foreign authorities to manage capital flows caused by these spillovers.

In Sessions 2 (lecture by Professor Yasuhiro Maehara of Hitotsubashi University) and Session 3 (lecture by Executive Director Kenzo Yamamoto of the Bank of Japan), the participants agreed with the lecturers that both price and financial stability were important, and that the goals need to be pursued in a flexible manner. There were some questions as to how to specifically and systematically incorporate longer-tern financial stability impacts into the inflation-targeting based monetary policy framework. Issues in identification of risks, communication of policy, and maintenance of credibility were underscored in the discussions.

The round-up Panel comprising the session lecturers (substituted by Mr. Yamaoka from BOJ for Mr. Yamamoto) and Former Bank of Thailand Governor Tarisa Watanagase (who led off with a presentation) discussed the issue of how to balance price stability and financial stability concerns, and the appropriate institutional and governance structures to best respond to these needs. There was a broad agreement that central banks had the expertise and synergies to best handle price stability and macro-prudential tasks, though some cautioned the political challenges of managing macro-prudential policies. There was a general feeling that, despite the difficulties and risks to central bank independence, central banks must face these challenges head on.

A dinner Q&A session with Governor Shirakawa of the Bank of Japan was also held. In responses to questions from the participants, the Governor made very thoughtful and insightful comments on his perspectives on the issue of large level of government debt in Japan, the state of the U.S. economy, the effect of yen appreciation, consequences of demographic transition and the international monetary system.

The Program of the event can be found here:[Challenges in Monetary Policy]

The IMF-OAP website (http://www.imf.org/external/oap/index.htm) also contains the presentation by lecturers.

Hitotsubashi Executive Program for Macroeconomics Policymakers
 

In 2005, the APPP began an Executive Program for Macroeconomic Policymakers of Asian governments with the funding support of the International Monetary Fund and cooperation from the Public Economics Program of the School of International and Public Policy. The Executive Program aimed to provide senior officials of Asian governments and central banks involved in macroeconomic policymaking with an opportunity to keep abreast of the latest research outcomes and academic thinking in macroeconomics and their relevance for policymaking. It gave participants in-depth perspectives on important issues affecting the Asian region and the global economy. Furthermore, the Program afforded participants opportunities for frank and open exchanges of views and experience to identify the issues of common concern in economic policymaking.
Under this Program, the first seminar was held in December 2005. The Executive Program was held twice a year for two weeks at a time, with 20 plus participants from around 10 countries attending each seminar, with the final seminar held in November/December 2010. Through the six year life of the program, the seminar was attended by 258 participants from 11 countries, creating a network of policymakers in the region.
We believe the seminar provided a valuable forum for policymakers in the region. We would like to thank the participants from the region for their valuable contributions to the seminar, as well as the lecturers from academia, government and business who helped the event to be such a success. While this Executive Program has been discontinued, by taking advantage of our experience with this Program and a wide network of policymakers, we would like to continue to strive for further improving policymaking in the region through a variety of other available channels.

Open Seminar on the Global Financial Crisis
and the Role of the IMF
 

On December 16, APPP sponsored an open seminar on the “Global Financial Crisis and the Role of the IMF”. The keynote speaker was Dr. Jack Boorman, who served as Head of the IMF’s Policy Development and Review Department for many years, and the panelists were Prof. Eisuke Sakakibara of Waseda University (former  Vice Minister of Finance for International Affairs), Mr. Akira Ariyoshi (Director of the IMF Regional Office for Asia and the Pacific), and APPP’s Prof. Yasuhiro Maehara. The seminar was moderated by APPP’s Prof. Masahiko Takeda. The audience, which numbered more than 100, included academics, current and former government officials, think tank economists, the press, and APPP and other students.

How to reform international financial institutions─and the IMF in particular─is a salient topic in the context of coping with the ongoing global financial crisis and preventing its recurrence. Dr. Boorman presented an ambitious list of steps to strengthen the IMF, such as an SDR allocation, a substantial quota increase, governance reform, and giving the IMF a new mandate on capital account transactions. While no fundamental disagreement was voiced by the panelists, they expressed caution on some of the steps proposed by Dr. Boorman. During the Q&A session that followed, the audience raised questions about the IMF’s role during the Asian Crisis, the seeming asymmetry of the IMF’s advice between developed and developing countries, and possible alternatives to the IMF such as the Chiang Mai Initiative.

The moderator concluded the seminar by noting that the debate on the IMF reform would no doubt continue, including at the next G20 Summit in April 2009, and that we received a lot of food of thought from the discussion that would help form our own views on where the reform process should be heading for.

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Hitotsubashi University