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Economies
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Monetary Policy and Central Banking: Challenges in the Current Environment
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Monetary Policy and Central Banking: Challenges in the Current Environment

A special issue of Economies (ISSN 2227-7099). This special issue belongs to the section "Macroeconomics, Monetary Economics, and Financial Markets".

Deadline for manuscript submissions: 1 September 2025 | Viewed by 9790

Special Issue Editor

Prof. Dr. Anthony J. Evans

E-Mail Website
Guest Editor
ESCP Europe Business School, 527 Finchley Road, London NW3 7BG, UK
Interests: monetary economics; transitional economics; neoliberalism

Special Issue Information

Dear Colleagues,

The objectives and functions of central banks have changed significantly over time, and large questions are currently being posed regarding future activities. This Special Issue looks at the extent to which topics such as inequality, green central banking, and central bank digital currencies should be integrated with more traditional concerns for economic performance. Do modern, complex problems require broader consideration for the social impact of policy decisions? Or should central banks be more mission-focused? By surveying a range of contemporary central bank performances, encompassing a broad geographic scope, we can identify, analyse, and assess areas of success and failure.

Prof. Dr. Anthony J. Evans
Guest Editor

Manuscript Submission Information

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Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Economies is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • central banks
  • central bank digital currencies
  • green central banking
  • inequality
  • inflation targets
  • mission focus
  • monetary policy
  • social impact
  • sustainability

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Published Papers (7 papers)

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Research

35 pages, 1651 KiB  
Article
Bank Profitability in Times of Quantitative Easing: The Role of Central Bank Transparency
by Athanasios Koukouridis
Economies 2025, 13(6), 161; https://doi.org/10.3390/economies13060161 - 5 Jun 2025
Viewed by 413
Abstract
To stabilize economies, central banks implemented unconventional monetary policies like quantitative easing following the global financial crisis. Although much research has been done on how quantitative easing affects financial markets, the influence of central bank transparency on bank profitability under such policies is [...] Read more.
To stabilize economies, central banks implemented unconventional monetary policies like quantitative easing following the global financial crisis. Although much research has been done on how quantitative easing affects financial markets, the influence of central bank transparency on bank profitability under such policies is still underexplored. This paper looks at how central bank transparency affects bank profitability in advanced countries under unconventional monetary policy. Using a panel dataset of commercial banks from 25 advanced economies (2013–2019), we apply a two-step Generalized Method of Moments (GMM) estimator to handle any endogeneity. Focusing on central bank transparency as a main transmission route, the model accounts for macroeconomic factors and bank-specific characteristics. The results show that central bank transparency greatly improves bank profitability together with quantitative easing. Although other elements, macroeconomic conditions and bank-specific characteristics, support transparency as a vital channel via which monetary policy influences the operation of the banking sector. This paper provides recommendations for legislators trying to enhance the effectiveness of unconventional policies in various institutional contexts by highlighting the need for central bank transparency as a channel for monetary policy efficacy. Full article
(This article belongs to the Special Issue Monetary Policy and Central Banking: Challenges in the Current Environment)
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24 pages, 1674 KiB  
Article
On the Weak Impact of Base Money on Broad Money in the Context of Unconventional Monetary Policy: Euro Area 2008–2024
by Carlos Pateiro-Rodríguez, Federico Martín-Bermúdez, Esther Barros-Campello and Carlos Pateiro-López
Economies 2025, 13(5), 130; https://doi.org/10.3390/economies13050130 - 12 May 2025
Viewed by 456
Abstract
In its response to the economic and financial crises of 2008, the sovereign debt and euro crisis of 2010–2015, and the COVID-19 pandemic of 2020–2023, the European Central Bank (ECB) implemented an unconventional monetary policy aimed at providing liquidity for more than a [...] Read more.
In its response to the economic and financial crises of 2008, the sovereign debt and euro crisis of 2010–2015, and the COVID-19 pandemic of 2020–2023, the European Central Bank (ECB) implemented an unconventional monetary policy aimed at providing liquidity for more than a decade, through a complex set of tools and operations that make up the so-called quantitative easing. The results of all of them are being analyzed from different perspectives. This paper studies the relationship between a large base money, characterized by a voluminous concentration of liquidity in the form of excess reserves, and broad money (the broad M3 aggregate). Our econometric work shows a low elasticity of broad money with respect to base money, concluding the existence of a weak relationship between both monetary magnitudes, with a sharp decline in the money multiplier. The demand for money has remained stable relative to its determining variables, interest rates and income. At the same time, some practices related to the handling of excess liquidity by European banks through deposit facilities deserve consideration. We propose strict control by the monetary authority over the nature and origin of the funds that constitute the excess liquidity derived from the ECB’s unconventional operations, and over its management. Full article
(This article belongs to the Special Issue Monetary Policy and Central Banking: Challenges in the Current Environment)
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16 pages, 425 KiB  
Article
Does Inflation Targeting Reduce Economic Uncertainty? Evidence from Mexico
by Domicio Cano-Espinosa
Economies 2025, 13(4), 109; https://doi.org/10.3390/economies13040109 - 15 Apr 2025
Viewed by 474
Abstract
This study examines the dynamic relationship between inflation, inflation uncertainty, and economic performance in Mexico using the Generalized Autoregressive Conditional Heteroskedasticity-in-Mean (GARCH-M) and bivariate GARCH-in-mean (BGARCH-M) models. Based on monthly data from 1995 to 2019, the analysis estimates nominal uncertainty and evaluates its [...] Read more.
This study examines the dynamic relationship between inflation, inflation uncertainty, and economic performance in Mexico using the Generalized Autoregressive Conditional Heteroskedasticity-in-Mean (GARCH-M) and bivariate GARCH-in-mean (BGARCH-M) models. Based on monthly data from 1995 to 2019, the analysis estimates nominal uncertainty and evaluates its macroeconomic implications under Mexico’s inflation-targeting regime. The results indicate a significant and positive link between past inflation and future uncertainty, underscoring the importance of maintaining low and stable inflation to contain volatility. Furthermore, inflation uncertainty is found to exert a negative influence on economic performance, particularly in terms of output variability. However, the study does not find conclusive evidence that inflation uncertainty declined following the formal adoption of inflation targeting. These findings suggest that, while Mexico has achieved price stability, inflation uncertainty remains sensitive to external shocks and policy credibility. The study contributes to the broader literature by reassessing the effectiveness of inflation targeting in an increasingly globalized and volatile environment, offering important lessons for emerging economies managing external vulnerabilities and institutional constraints. Full article
(This article belongs to the Special Issue Monetary Policy and Central Banking: Challenges in the Current Environment)
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18 pages, 3407 KiB  
Article
Efficiency and Competitiveness of Banking in Indonesia Based on Bank Core Capital Group
by Sylvia Arief Ischak, Mohammad Syamsul Maarif, Irman Hermadi and Zenal Asikin
Economies 2024, 12(12), 345; https://doi.org/10.3390/economies12120345 - 16 Dec 2024
Viewed by 2227
Abstract
The banking sector in Indonesia is currently growing and developing. This is due to the Indonesian Financial Services Authority (OJK) implementing reforms to strengthen the banking sector and enhance financial stability. One of the reforms is in the form of regulation that categorizes [...] Read more.
The banking sector in Indonesia is currently growing and developing. This is due to the Indonesian Financial Services Authority (OJK) implementing reforms to strengthen the banking sector and enhance financial stability. One of the reforms is in the form of regulation that categorizes banks into four special categories based on core capital. This study aimed to analyzing the relationship between the efficiency and competitiveness of BUKU 1 to IV banks and KBMI 1 to IV banks in Indonesia. The data in this study were collected from journals, scientific articles, banking statistics, and financial reports of all banks based on KBMI (formerly BUKU) published by the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX) for the period from 2018 to 2023. The results found there are no significant changes in patterns within the BUKU and KBMI groups. However, in the KBMI 4 group, a positive correlation between competitiveness and efficiency is observed, meaning that an increase in efficiency will be followed by an increase in a bank’s competitiveness. This group has the same pattern as the KBMI 1 and KBMI 3 groups. Meanwhile, the KBMI 2 group still follows the same pattern as in the BUKU 2 group, where an increase in efficiency is accompanied by a decrease in competitiveness, and vice versa; an increase in competitiveness will be followed by a decrease in a bank’s efficiency. Full article
(This article belongs to the Special Issue Monetary Policy and Central Banking: Challenges in the Current Environment)
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32 pages, 4308 KiB  
Article
A Structural Vector Autoregression Exploration of South Africa’s Monetary and Macroprudential Policy Interactions
by Khwazi Magubane and Ntokozo Patrick Nzimande
Economies 2024, 12(10), 278; https://doi.org/10.3390/economies12100278 - 15 Oct 2024
Cited by 1 | Viewed by 1314
Abstract
Interactions between monetary and macroprudential policy are crucial in safeguarding price and financial stability. This study investigates the macroeconomic and financial impacts of monetary and macroprudential policy interactions in South Africa, a leading African economy in developing macroprudential frameworks. The existing literature largely [...] Read more.
Interactions between monetary and macroprudential policy are crucial in safeguarding price and financial stability. This study investigates the macroeconomic and financial impacts of monetary and macroprudential policy interactions in South Africa, a leading African economy in developing macroprudential frameworks. The existing literature largely focuses on the effectiveness of these policies independently, leaving a gap in understanding how their interaction affects their overall efficacy. Employing a Structural Vector Autoregression (SVAR) model and utilizing data from 1980 to 2023, this study uniquely incorporates the financial cycle to represent financial developments. The results reveal significant effects of both policies on key variables such as output, the financial cycle, and the price level. Specifically, policy contractions reduce output and the financial cycle but increase the price level, illustrating the ‘price puzzle’. This study further identifies an endogenous response between the two policies: monetary policy reacts by rising to reduce price levels following a macroprudential shock, while macroprudential policy rises to stimulate financial activity after a monetary shock. These findings underscore the importance of using both policies in conjunction but in opposite directions to balance their effects and achieve price and financial stability. This study suggests that an optimal combination of monetary and macroprudential policies is critical for maintaining macroeconomic equilibrium. Full article
(This article belongs to the Special Issue Monetary Policy and Central Banking: Challenges in the Current Environment)
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20 pages, 1392 KiB  
Article
Parallel Currencies under Free Floating Exchange Rates: A Model Setting Out the Conditions for Stable Currency Competition
by Juan E. Castañeda, Sebastian Damrich and Pedro Schwartz
Economies 2024, 12(10), 257; https://doi.org/10.3390/economies12100257 - 24 Sep 2024
Cited by 2 | Viewed by 2070
Abstract
We use a theoretical model to set up the conditions for a country to attain monetary stability by allowing for two freely tradable currencies to circulate in parallel. For this parallel system to function properly, confidence in the good behavior of the monetary [...] Read more.
We use a theoretical model to set up the conditions for a country to attain monetary stability by allowing for two freely tradable currencies to circulate in parallel. For this parallel system to function properly, confidence in the good behavior of the monetary authorities in charge of the two currencies is key. Our model shows how a floating exchange rate between the two can keep the issuers of the local currency in check. The results from our model show the conditions under which a parallel currency system disciplines the issuers of the currencies and thus maintains their purchasing power. In non-volatile economies, it also discourages governments (or private issuers) from inflating one of the currencies as a means to raise seigniorage, as this policy results in the displacement of the currency from the market. When foreign payments shortfall—such as in Greece and Cyprus during the ‘euro crisis’ in the mid-2010s, or intractable hyperinflation—leave the country without a medium of exchange, our model shows how currency choice can restore monetary circulation and offer a path to achieving and maintaining monetary stability. Full article
(This article belongs to the Special Issue Monetary Policy and Central Banking: Challenges in the Current Environment)
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11 pages, 222 KiB  
Article
Stock Markets and Stress Test Announcements: Evidence from European Banks
by Christos Floros, Efstathios Karpouzis and Nikolaos Daskalakis
Economies 2024, 12(7), 171; https://doi.org/10.3390/economies12070171 - 4 Jul 2024
Viewed by 1621
Abstract
This paper examines the market reaction to the European bank stress test announcement and results release events. Using event study methodology (calculating abnormal returns on a three-day period around the event dates), we find that the market reacts differently between the announcement event [...] Read more.
This paper examines the market reaction to the European bank stress test announcement and results release events. Using event study methodology (calculating abnormal returns on a three-day period around the event dates), we find that the market reacts differently between the announcement event and the results release event. We also show that the market seems to positively overreact one day before each event, and that this positive reaction is either fully or partially reversed one day after the event. We thus conclude that researchers should consider both events when exploring the market reaction to stress-testing exercises. Full article
(This article belongs to the Special Issue Monetary Policy and Central Banking: Challenges in the Current Environment)
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