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 actions and decisions taken by a central bank to regulate the supply and demand of money in a country's economy.
Money Supply: The total amount of money available in an economy at a given point in time.
Central Banks: Institutions responsible for overseeing monetary policy in a country or region.
Interest Rates: The cost of borrowing money, which is determined by the central bank.
Inflation: The rate at which the general price level of goods and services increases over time.
Deflation: The opposite of inflation, where the general price level of goods and services decreases over time.
Exchange Rates: The value of one currency in relation to another currency.
Open Market Operations: The purchase or sale of government securities by the central bank to influence the money supply.
Reserve Requirements: The amount of money that banks are required to hold in reserve.
Discount Rate: The interest rate at which banks can borrow money from the central bank.
Fiscal Policy: The use of government spending and taxation to influence the economy.
Money Creation: The process by which banks create new money through loans.
Quantitative Easing: A policy used by central banks to stimulate the economy by purchasing government securities or other assets.
Taylor Rule: An economic principle used by central banks to set interest rates based on inflation and economic growth.
Velocity of Money: The rate at which money circulates through the economy.
Nominal and Real Interest Rates: Nominal interest rates are the stated interest rates while real interest rates take into account inflation.
Phillips Curve: A graph that shows the relationship between unemployment and inflation.
Business Cycles: The recurring cycles of economic expansion and contraction.
Economic Growth: The increase in total output of goods and services in an economy over time.
Unemployment: The percentage of people in the labor force who are currently unemployed.
Inflation Expectations: The expectations of future inflation by individuals and businesses, which can influence their behavior in the economy.
Interest rate targeting: This involves setting the target for short-term interest rates to influence the borrowing and lending behavior of households and businesses.
Inflation targeting: This involves setting a target for the inflation rate, and adjusting policies to keep inflation within this range.
Money supply targeting: This involves setting a target for the growth rate of money supply, which can influence the level of interest rates and inflation.
Exchange rate targeting: This involves managing the exchange rate by buying or selling foreign currency to influence currencies relative value.
Quantitative easing: This involves purchasing government securities or other financial instruments to increase the money supply and stimulate lending.
Open market operations: This involves buying and selling government securities in the open market to influence the level of interest rates and the money supply.
Reserve requirements: This involves setting a reserve requirement for banks, which can influence the level of lending and the money supply.
Discount rates: This involves setting the interest rate at which banks can borrow money from the central bank, which can influence the level of lending and the money supply.
Forward guidance: This involves providing guidance to markets and households on future policy intentions, which can influence expectations and behavior.
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."