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IN THE UNITED KINGDOM, THE GOAL OF THE MONETARY POLICY WAS TO KEEP THE INTEREST RATE LOW THROUGH DIRECT CONTROLS AND OR MONETARY EXPANSION. HOWEVER, THE INFLUENCE OF THE CENTRAL BANK IN THE CONDUCT OF MONETARY AND FINANCIAL POLICY FOR PRICE STABILTY, CANNOT BE OVER EMPHASISED.
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Central Banks Monetary Policies 2nd Week Lecture 24th to 29th March 2014 (22.39)
IN THE UNITED KINGDOM, THE GOAL OF THE MONETARY POLICY WAS TO KEEP THE INTEREST RATE LOW THROUGH DIRECT CONTROLS AND OR MONETARY EXPANSION. HOWEVER, THE INFLUENCE OF THE CENTRAL BANK IN THE CONDUCT OF MONETARY AND FINANCIAL POLICY FOR PRICE STABILTY, CANNOT BE OVER EMPHASISED.
IN THE UNITED KINGDOM, THE GOAL OF THE MONETARY POLICY WAS TO KEEP THE INTEREST RATE LOW THROUGH DIRECT CONTROLS AND OR MONETARY EXPANSION. HOWEVER, THE INFLUENCE OF THE CENTRAL BANK IN THE CONDUCT OF MONETARY AND FINANCIAL POLICY FOR PRICE STABILTY, CANNOT BE OVER EMPHASISED.
and Financial Institutions AT THE OUTSET IN THE UNITED KINGDOM, THE ROLE OF THE MONETARY POLICY WAS TO RESTS WITH THE CENTRAL BANK AND THE GOVERNMENT.
THE GOAL OF THE MONETARY POLICY WAS TO KEEP THE INTEREST RATE LOW THROUGH DIRECT CONTROLS AND OR MONETARY EXPANSION.
GENERALLY, WHY THE CENTRAL BANK IS ACTIVELY INVOLVED WITH THE CONTROL OF MONETARY POLICY (THE TREASURY) HAS GREAT INFLUENCE OVER THE WAY MONETARY POLICY SHOULD BE CONDUCTED.
HOWEVER, THE INFLUENCE OF THE CENTRAL BANKS AUTONOMY IN THE CONDUCT OF MONETARY POLICY FOR PRICE STABILTY, CANNOT BE OVER EMPHASISED A KEY COMPONENT OF ECONOMIC POLICY
IT RELATES TO OFFICIAL ACTIONS TAKEN BY CENTRAL BANK TO CHANGE MONETARY AND FINANCIAL CONDITIONS
THE CONDITIONS MUST BE WITHIN THE OPERATIONAL CONDITIONS IN THE ECONOMY. MONETARY POLICY CAN RELATE TO THE ACHEIVEMENTS OF THE CENTRAL BANKS OFFICIAL OBJECTIVES
NAMELY : (i) LOWER INFLATION (ii) ENHANCE MENT OF STEADY ECONOMIC GROWTH (iii) FOSTERING FINANCIAL AND MONETARY EQUILIBRIUM IN THE BALANCE OF PAYMENTS (iv) MAINTAINING SOUND ECONOMIC AND EXCHANGE RATE STABILITY
(v) ENHANCE MENT OF ADEQUATE BANK CREDITS AND RESERVES
(vi) FOSTERING THE EFFECTIVENESS OF EXCHANGE RATES ARRANGEMENTS, MONETARY POLICY FRAMEWORKS AND CONTROLS
(vii) MONETARY POLICY PROVIDES A TOOL FOR ADEQUATE AND SOUND REGULATIONS OVER CAPITAL FLOWS
(viii) MONETARY POLICY CAN SERVE AS MECHANISMS DESIGNED TO IMPLEMENT GOVERNMENT FINANCIAL DECISIONS BY CENTRAL BANKS TO ACHIEVE THE NATIONAL AND WELL DEFINED ECONOMIC GOALS (ix) IN THE BALANCE, THE IMPACT ON MONETARY POLICY ON AGGREGATE DEMAND FOR GOODS AND SERVICES DEPENDS ON THE RESPONSES OF THE CONSUMERS AND PRODUCT USERS.
(x) IT ALSO RELATES TO INVESTORS TO CHANGES IN THE MONETARY AND FINANCIAL CONDITIONS OF THE CENTRAL BANKS AND THEIR POLICY ACTIONS
UNTIL RECENTLY, MONETARY POLICIES HAD BEEN USED TO ACHIEVE MULTIPLE OBJECTIVES.
THE MAIN USES OF THIS POLICY INCLUDE: ECONOMIC GROWTH
POVERTY ALLEVIATION
AMELIORATION OF BUSINESS CYCLES TO MAINTAIN AND ACHIEVE EFFECTIVE PRICE STABILITY
IT ENSURES THE EXPANSION OF AN AGGREGATE DEMAND DURING A RECESSION
AN EXPANSIONARY MONETARY POLICY CAN HELP TOACHEIVE FULL EMPLOYMENT ESPECIALLY IF THERE WERE NO LIQUIDITY TRAP OR INVESTMENT PESSIMISM
MONETARY POLICY SERVES AS THE ROLE FOR THE CREATION OF A STABLE MACRO ECONOMIC ENVIRONMENT
THIS CAN ARISE WHERE REAL ECONOMIC FORCES OPERATE MONETARY EXPANSION HAS A LASTING EFFECT ON THE PRICE LEVEL, NOT ON OUTPUT OR EMPLOYMENT
INFLATION IS COSTLY, BOTH IN TERMS OF RESOURCE ALLOCATION AND LONG TERM OUTPUT GROWTH. MONETARY POLICY HAS A TRANSITORY EFFECT ON A NUMBER OF REAL VARIABLES
MONETARY POLICY ALSO AFFECTS THE INFLATION RATES WITH LAGS OF UNCERTAIN DURATION.
THE IMPACT CAN BE OF VARIALBLE STRENGTHS WHICH CAN UNDERMINE THE CENTRAL BANKS ABILITY TO CONTROL INFLATION ON A PERIOD BY PERIOD BASIS
THE ARGUMENTS FOR IMPLEMENTING MONETARY POLICY
(a) TO CONTROL INFLATION
(i) IT MAKES MONETARY POLICY TRANSPARENT AND CREDIBLE
(ii) ALLOWS THE CENTRAL BANK TO BE INDEPENDENT, YET STILL ACCOUNTABLE
CENTRAL BANKS AND MONETARY POLICY ARE ESSENTIAL MECHANISMS FOR GROWTH
(a) PRICE STABILITY AS THE SOLE OR OVERRIDING OBJECTIVE OF MONETARY POLICY
(b) MONETARY POLICY FOR TAMINING BUSINESS CYCLES PRICE STABILITY AS A MEANS OF A HEALTHY ECONOMY MONETARY POLICY SHOULD AVOID TIME INCONSISTENCY
INCONSISTENCY IN MONETARY POLICY IS A MAJOR PROBLEM THAT POLICY- MAKERS GENERALLY FACE HAVING DUAL GOALS INFLATION AND FULL-EMPLOYMENT IN POLICY FORMULATION AND IMPLEMENTATION ARE ESSENTIAL PRIORITY PROGRAMMES OF THE CENTRAL BANK CHOICE OF MONETARY POLICY RULES
IT BRINGS PRICE STABILITY BY IMPOSING CONTROL OVER MONETARY AGGREGATE AND ITS GROWTH RATE
MONETARY POLICY SHOULD BE FORWARD LOOKING, NOT TO WAIT UNTIL INFLATION IS IMMINENT
MONETRAY POLICY RELATES TO THE SUPPLY AND PRICE OF MONEY IN THE ECONOMY. THE PRIMARY OBJECTIVE IS TO CONTROL INFLATION. IF THE MONETARY POLICY IS LOOSE, IT LEADS TO MORE BORROWING. THIS COULD LEAD TO INFLATION AND EXTERNAL DEFICIT. IF MONETARY POLICY IS TIGHT, IT MAY SLOW DOWN DEMAND AND OUTPUT COULD LEAD TO MORE JOB LOSSES
INCREASE IN INTEREST RATE DISCOURAGES SPENDING. CONSUMERS COUL BE ENCOURAGED TO SAVE WITH HIGH INTEREST RATES. THERE WOULD BE RISES IN MORTGATE REPAYMENTS. THE HIGHER COSTS OF CREDITS COULD DETER BORROWERS. THE CORPORATE INVESTMENTS WOULD DECLINE AS WITH SMALL AND MEDIUM SIZED INVESTMENTS. THE PUBLIC SECTOR COULD BEGIN TO LOOSE CONFIDENCE IN THE ECONOMY INFLATION IS DEFINED AS PERSISTENT INCREASE IN THE LEVEL OF PRICES. INFLATION ARISES BY DEMAND- PULL, COST INCREASES, EXPECTIONAL CIRCUMSTANCES, DISRUPTION OF BUSINESS PLANNING, REAL VALUE OF SAVINGS IS REDUCED. HIGHER WAGE DEMAND ON EMPLOYERS. OPERATIONS AND PRICE MECHANISMS ARE DISTORED AND COULD LEAD TO UNEMPLOYMENT.
(Handbook of Exploration Geochemistry 5) KALEVI KAURANNE (Eds.) - Regolith Exploration Geochemistry in Arctic and Temperate Terrains-Elsevier Science (1992) PDF