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 interrelatedness between monetary policy and financial markets to understand how monetary conditions affect asset prices and market performance.
Money supply: The total amount of money in circulation in a country.
Monetary policy: The actions taken by a central bank to control the money supply and achieve macroeconomic objectives such as price stability and full employment.
Inflation: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
Interest rates: The cost of borrowing money, typically expressed as a percentage per year.
Exchange rates: The value of one currency against another currency or a basket of currencies, determined by the demand and supply of the currencies in the global foreign exchange market.
Financial markets: Markets that facilitate the buying and selling of financial instruments such as stocks, bonds, and commodities.
Stock market: A market where publicly traded companies' shares are bought and sold.
Bond market: A market where investors buy and sell bonds, which represent a loan to a government or company.
Commodity market: A market where raw materials or primary agricultural products are traded.
Financial intermediaries: Financial institutions that act as intermediaries between savers and borrowers, such as banks, credit unions, and insurance companies.
Central banks: The financial institution that manages monetary policy and regulates financial institutions in a country.
Fiscal policy: The use of government spending and taxation to influence macroeconomic outcomes such as inflation, employment, and economic growth.
Macroeconomic indicators: Quantitative measures that provide insight into the health of an economy, such as Gross Domestic Product (GDP) and unemployment rates.
Economic systems: The different ways in which societies allocate resources and produce goods and services, such as capitalism, socialism, and communism.
Financial crises: A situation where the financial system collapses or faces severe disruption, leading to economic recession or depression.
Monetary theory: The body of knowledge that analyzes the relationships between money, prices, and economic activity.
Behavioral finance: The study of how psychological factors affect financial decision-making and financial markets.
International finance: The branch of finance that deals with financial transactions between countries and international capital flows.
Monetary Policy: The process by which a country's central bank makes decisions about the supply of money and interest rates in order to achieve various economic goals.
Inflation: The rate at which the overall price level of goods and services in an economy is increasing.
Money Supply: The amount of money in circulation in an economy, including the sum of cash, deposits, and other financial instruments.
Interest Rates: The cost of borrowing money, determined by market forces or set by the central bank.
Exchange Rates: The value of one country's currency in terms of another country's currency.
Commercial Banks: Financial institutions that accept deposits and make loans to households and businesses.
Money Market: A market for short-term debt instruments, such as Treasury bills, commercial paper and certificates of deposit.
Capital Market: A market for long-term debt and equity instruments, such as stocks and bonds.
Financial Intermediation: The process through which financial institutions transfer funds from savers to borrowers.
Central Bank: A national institution that oversees the monetary system and sets monetary policy, including the regulation of commercial banks and controlling the supply of money.
Stock Market: A marketplace where publicly traded companies sell shares of their ownership to investors.
Bond Market: A marketplace where investors can buy and sell various types of bonds, which are debt securities issued by companies or governments.
Foreign Exchange Market (Forex): A market for trading currencies from around the world.
Cryptocurrency Market: A digital, decentralized marketplace for buying and selling various types of cryptocurrencies.
Derivatives Market: A market for financial instruments derived from underlying assets, such as futures and options contracts.
Commodities Market: A market for trading natural resources and raw materials, such as oil, gold, and wheat.
Real Estate Market: A marketplace where properties are bought and sold, either for personal use or as an investment.
Money Market: A market for short-term debt instruments, such as Treasury bills, commercial paper and certificates of deposit.
Capital Market: A market for long-term debt and equity instruments, such as stocks and bonds.
Dark Market / Underground Economy: A market for illegal goods and services that is not regulated by any government or financial institution.
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."