BNM Monetary Policy Conference 2019, 26 September 2019: Policy Space Given Multifaceted Risks: Between A Rock and A Hard Place

On 26 September 2019, Bank Negara Malaysia organised a Monetary Policy Conference with the theme "Policy Space Given Multifaceted Risks: Between A Rock and A Hard Place". The conference aimed at generating robust and lively discussions on the current challenges facing monetary policy. The first session discussed the increasing lack of policy space faced by central banks amid the current challenging environment, while the second session explored the distributional effects of monetary policy, and whether new insights from other disciplines can offer fresh perspectives to monetary policy.

Speakers and moderators comprised senior representatives from central banks (both past and present), academia, and international and regional policy institutions. The conference was attended by approximately 140 participants comprising amongst others, central bankers, academics, and representatives from international and regional research and policy institutions, the Government, and financial institutions. 

Please find below the proceedings from the conference.

Programme

Keynote Address  Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, University of California, Berkeley. To watch the keynote address, please click here.

Professor Barry Eichengreen delivered the keynote address on the challenges of macroeconomic stabilisation in the current low interest rate environment and how central banks’ policies relate to other policies, such as fiscal policy and climate change abatement policies. His address also pointed towards questions regarding the future of central banking independence, viewing that central bank independence has become tenuous as central banks are seen to be overstepping their boundaries. In his view, should central banks wish to consider other policy areas beyond their mandate, it is crucial to communicate how their actions can be consistent with their core mandate.

Session 1 : How can we manage the lack of monetary policy space?

Discussions and presentations during this session touched on areas related to the narrowing of monetary policy space, the over-reliance on monetary policy, and the case for having an integrated policy framework that considers an effective policy mix for countries to pursue their growth and stability objectives.

Session 2 : Pushing the monetary policy frontier

This session centered on the distributional effects of monetary policy, contrasting two views on how central banks can attempt to address the broader issue of inequality.  Views on whether inequality should be factored into a central bank’s monetary policy reaction function; or being structural in nature, lies beyond the realm of monetary policy and thus can only be addressed by other structural policies, sparked a robust discussion among the audience. The final special session provided a perspective on the need for central banks to break away from its traditional thinking and ways of conducting business, which would require strong interest and action to incentivise and reward creativity, and to ensure that query and introspection are viewed as a "generative" rather than a "destructive" process.