Training course on Monetary Policy Formulation and Implementation for Central Banks

Module 1: Foundations of Monetary Policy

Objectives: price stability, growth, employment, financial stability

Evolution of monetary policy theory and practice

Role of central banks in modern economies

Module 2: Monetary Policy Frameworks

Inflation targeting and flexible inflation targeting

Exchange rate-based regimes

Monetary targeting and hybrid approaches

Case studies from advanced and emerging economies

Module 3: Policy Formulation Process

Role of data, models, and forecasts in policy analysis

Structure and functioning of Monetary Policy Committees (MPCs)

Trade-offs: inflation-output, short-term vs. long-term stability

Module 4: Monetary Policy Transmission Mechanism

Interest rate, credit, exchange rate, and asset price channels

Expectations and credibility effects

Assessing transmission lags and effectiveness

Module 5: Monetary Policy Implementation Tools

Open market operations (repos, reverse repos, outright sales/purchases)

Standing facilities and discount window

Reserve requirements and liquidity management

Unconventional tools: QE, negative rates, forward guidance

Module 6: Role of Financial Markets in Policy Implementation

Interbank markets and money market development

Central bank balance sheet as a policy tool

Interaction with capital markets

Module 7: Communication and Credibility in Monetary Policy

Central bank transparency and accountability

Policy signaling, forward guidance, and market expectations

Effective communication strategies for credibility

Module 8: Macroeconomic Modeling and Forecasting for Policy

Role of DSGE, VAR, and structural models in policy analysis

Scenario analysis and policy simulations

Using forecasts to guide decision-making

Module 9: Challenges in Monetary Policy

Global spillovers, capital flows, and exchange rate volatility

Low interest rate environments and unconventional policy

Climate change and green monetary policy considerations

Digital currencies and fintech implications

Module 10: Monetary Policy in Emerging and Developing Economies

Shallow financial markets and policy transmission challenges

External shocks and exchange rate pressures

Case studies: Africa, Asia, Latin America

Module 11: Case Studies and Comparative Practices

U. S. Federal Reserve, European Central Bank, Bank of Japan, and Bank of England approaches

Policy lessons from crises (2008 GFC, COVID-19, inflation resurgence)

Central bank independence and institutional frameworks

Module 12: Capstone Simulation

Simulated Monetary Policy Committee exercise

Participants analyze data, debate policy options, and set interest rates

Draft and present a mock policy statement