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Moneytary Policy Essay

3897 words - 16 pages


1. Concept | 2 |
2. The purpose of monetary policy | 2 |
a. Price stability | |
b. Ensure full employment | |
c. Economic Growth | |
3. Tools of monetary policy | 3 |
a. Open market operation | |
b. Obligatory reserves | |
c. Rediscount policy | |
4. Types of monetary policy | 4 |
1. Monetary in 2008-2009 | 5 |
2. Monetary in 20010 -2011 | 11 |
3. Monetary in 2012 | 12 |

1. Concept
Monetary policy is one of economic policy that is proposed and implemented by the central bank with ...view middle of the document...

b. Ensure full employment
Along with the goal of economic growth, monetary policy and the objectives of creating jobs for all members of society to reduce unemployment. Unemployment causes stress for individuals and their families are the seeds of percentage, difficult to remove completely unemployed. Each country has an unemployment rate that is proportional nature is composed of temporary unemployment and structural unemployment. The reduction of the natural unemployment rate is one of the objectives of monetary policy.

c. Economic Growth
Economy with stable growth is required economic development of each country and is one of the important factors to ensure the stability of the currency. Economic growth is the GDP growth rate greater than the population growth rate. Monetary policy must ensure that the increase in real GDP, the rate was only after subtracting the inflation rate period. Quality growth is expressed in a balanced economic structure and international competitiveness of domestic goods increases. It is the foundation for all the stability, for economic growth to ensure social policies are met, as a basis for monetary stability in the country.

3. Tools of Monetary Policy
a. Open-Market operations
As the securities trading activities by central banks made ​​on the open market to influence the monetary base thereby regulating the money supply. When central banks buy (sell) the stock would make the monetary base increases (decreases) resulting in the money supply increases (decreases). Features: Due to the flexible use of this market should be considered as a dynamic tool, the efficiency and accuracy of this monetary policy .However , as is done through the exchange so it depends the other factors involved in the market and the other for the effective tools require the coordinated development of the money market, the capital market.

b. Obligatory reserves
The amount of reserve requirement is the amount that banks must hold, due to central bank regulations, deposited at the central bank, did not qualify again, not used for investment, lending and usually calculated as a certain percentage of the total number of customer deposits to ensure solvency, the stability of the banking system.
Changing the required reserve ratio directly affect the money multiplier (m = 1+ss+ER+RR) in the structure of the commercial banks. On the other hand the increase (decrease) in reserve requirement ratio, the lending capacity of the commercial banks decreased (increased), and making lending rates increased (decreased), thereby reducing the amount of money supply (increased).

The reserves requirement rate | Reserves requirement | External Reserves | Loan |
Increase | Increase | - | decrease |
This is a tool state management should help central banks active in regulating the money supply and its impact is very strong (just change a small amount of the reserve ratio required to affect a very large amount of the money...

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