Acta academica karviniensia 2013, 13(1):21-33 | DOI: 10.25142/aak.2013.003

Changes of Monetary Policy's Concept in the Context of the Business Cycle

Slavoj Czesaný

Vysoká škola ekonomická v Praze, Národohospodářská fakulta, Nám. W. Churchilla 4,130 67 Praha 3, Email:czesany.slavoj@volny.cz

A brief look in the history shows that there were many different concepts for monetary policy making that have got asserted in the past. Among the features that distinguished one from another were mainly the settings of the main target of the monetary policy and the selection of instruments for their fulfilment. Different approaches of the central banks to the definition of the main target or the anchor of the monetary policy were applied. In the post-war decades, the most common approach used was making the monetary policy not public and application of the fixed exchange rate. In the following decades it was at first targeting of monetary aggregates that got well established, later followed by targeting of inflation. The main goal of this article is to analyze the role and function of monetary policy in smoothing of the economic cycle. Among the partial targets of the article is assessment of strong and weak points of alternative monetary policy concepts and reasoning of the possible changes in monetary policy settings in the following era.

Keywords: business cycle, financial crises, gross domestic product, inflation, macroeconomic balance, monetary policy, recession

JEL classification: D10, E24, E30, N14, O11

Received: March 23, 2011; Accepted: March 13, 2013; Published: March 30, 2013  Show citation