Quote: "Monetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability..."
The decisions made by the central bank of a country regarding the money supply and interest rates.
Macroeconomics: The study of the overall functioning and behavior of the economy.
Money supply: The amount of money in circulation in an economy, which is controlled by the central bank.
Interest rates: The cost of borrowing money, which is determined by market conditions and central bank policy.
Inflation: The rate at which the general level of prices for goods and services is rising, which is closely monitored by central banks.
Fiscal policy: The use of government spending and taxation to influence the economy, which is related to monetary policy.
Central bank: The institution responsible for controlling the nation's money supply and monetary policy in general.
Open market operations: The buying and selling of government securities by the central bank to influence the money supply in the economy.
Discount rate: The interest rate at which banks can borrow money from the central bank, which can affect their lending practices.
Reserve requirement: The amount of money that banks are required to keep on hand, which can also affect their lending practices.
Money multiplier: The amount that the money supply is increased when banks lend out deposits received from customers.
Exchange rates: The value of one currency compared to another currency, which can be influenced by monetary policy.
Economic growth: The rate at which the economy is expanding, which is affected by monetary policy and other factors.
Phillips curve: The relationship between unemployment and inflation, which can influence central bank policy decisions.
Credit easing: When the central bank purchases assets from other financial institutions in order to increase the availability of credit in the economy during a recession.
Quantitative easing: When the central bank purchases large amounts of assets in an effort to increase the money supply and stimulate economic growth.
Conventional Monetary Policy: This is the most commonly used monetary policy where the central bank sets the interest rate as a tool to manage inflation and boost economic growth.
Unconventional Monetary Policy: This type of monetary policy involves unconventional measures such as quantitative easing, forward guidance, and negative interest rates that are used when conventional policy tools are not effective.
Inflation Targeting: Inflation targeting is a monetary policy that focuses on achieving a specific inflation target over a certain period.
Price-Level Targeting: Price-level targeting is a monetary policy that seeks to stabilize the price level by targeting a specific level of prices rather than a specific inflation rate.
Monetary Targeting: This type of monetary policy involves targeting the money supply to manage inflation and economic growth.
Exchange Rate Targeting: Exchange rate targeting involves using monetary policy to manage the exchange rate of a currency.
Zero Interest Rate Policy (ZIRP): ZIRP is a monetary policy where the central bank sets the short-term interest rate to zero to stimulate economic growth and fight deflation.
Negative Interest Rate Policy (NIRP): NIRP is a monetary policy where the central bank sets the interest rate below zero to stimulate lending and investment.
Forward Guidance: Forward guidance is a monetary policy tool where the central bank communicates its future monetary policy plans to influence market expectations and guide economic behavior.
Quantitative Easing (QE): QE is a monetary policy where the central bank buys government bonds to increase the money supply and stimulate economic growth.
Credit Easing: Credit easing is a monetary policy tool where the central bank buys private sector debt to support lending and business investment.
Funding for Lending: This is a program where the central bank provides funding to commercial banks at a low rate to encourage lending to households and businesses.
Asset Purchase Programs: Asset purchase programs involve the central bank buying non-government assets such as corporate bonds to stimulate economic growth.
Quote: "...to accomplish broader objectives like high employment and price stability (normally interpreted as a low and stable rate of inflation)."
Quote: "Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchange rates with other currencies."
Quote: "Today most central banks in developed countries conduct their monetary policy within an inflation targeting framework..."
Quote: "A third monetary policy strategy, targeting the money supply, was widely followed during the 1980s..."
Quote: "The tools of monetary policy vary from central bank to central bank..."
Quote: "Interest rate targeting is generally the primary tool..."
Quote: "Interest rates affect general economic activity and consequently employment and inflation..."
Quote: "Monetary policy affects the economy through financial channels like interest rates, exchange rates, and prices of financial assets."
Quote: "This is in contrast to fiscal policy, which relies on changes in taxation and government spending..."
Quote: "In developed countries, monetary policy is generally formed separately from fiscal policy..."
Quote: "Modern central banks in developed economies being independent of direct government control and directives."
Quote: "How best to conduct monetary policy is an active and debated research area..."
Quote: "Interest rates affect general economic activity and consequently employment and inflation via a number of different channels..."
Quote: "...indirectly via open market operations."
Quote: "Other policy tools include communication strategies like forward guidance..."
Quote: "Monetary policy is often referred to as being either expansionary (stimulating economic activity and consequently employment and inflation)..."
Quote: "Monetary policy is often referred to as being either contractionary (dampening economic activity, hence decreasing employment and inflation)..."
Quote: "...and are also an important determinant of the exchange rate."
Quote: "How best to conduct monetary policy is an active and debated research area, drawing on fields like monetary economics as well as other subfields within macroeconomics."