Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. Further goals of a monetary policy are usually to contribute to economic growth and stability, to low unemployment, and to predictable exchange rates with other currencies.
Questions tagged [monetary-policy]
447 questions
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How/why does foreign investment get scared by the monetary policy?
In an interview with Daron Acemoglu, he says "the hot money which was floating through Turkey has stopped after FED's declaration that we are going to give much more attention on monetary policy".
Basically I know some fundamental things like…
Mustafa Güven
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What is the purpose of monetary expansion during an economic lockdown?
Recently, most developed countries central banks substantially lowered their base interest rate. In Australia, this is now at their stated lower bound of 0.25%. We also have QE. This is all in an attempt to stimulate the economy.
At the same time,…
Jamzy
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Gali - Monetary Policy - Solutions?
I am working through exercises in Gali but some of them are rather difficult. I am trying to find a solutions manual to use as an aide for exercises that completely stump me and to confirm solutions for the exercises I have completed.
Does anyone…
guestguestguest
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Low interest rates - who benefits, rich or poor?
I just heard Andy Haldane, chief economist at the Bank of England make the following statement about the bank's ultra low interest rate policy and accusations that it disproportionately benefited the rich:
"on average those that have debts tend to…
Mick
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Why do central banks currently favor cheap money policies?
Currently, central banks around the world are setting very low interest rates.
According to Taylor rules, which most central banks can be shown to roughly follow, this implies that they believe that the natural level of output is greater than the…
HRSE
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Open market operations vs quantitative easing
I’m a little confused about the distinction between open market operations of a central bank and quantitative easing/tightening. My textbook essentially defines both as instances where the central bank increased/decreases the money supply by buying…
hmmmm
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Monetary Policy adjustments as a result of Brexit
I would like to know the impact of interest rates within Monetary Policies in view of Brexit.
An increase in the Monetary stock would lead to a decline (at least in the short-term) in nominal interest rates. Conversely, decrease in money stock can…
BitsInForce
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Why is the rising price of a commodity inflationary, while the rising price of money is disinflationary?
Everybody buys oil and everybody borrows money. If the price of oil goes up, we call that inflation and the central bank uses monetary policy (rising interest rates) to reduce inflation. Why is the price of money (i.e. interest rates) different from…
foolishmuse
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What is the logic of Bagehot's policy of high interest rate?
I have a doubt about monetary policy, as suggested by Walter Bagehot. He wrote a book "Lombard Street" in 1873, to comment on a recent banking crisis. There he recommends these measures to stop a banking panic:
That the central bank lend freely.
At…
chatGPT
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Why do Reserve Banks only move in 0.25 basis point 'leaps'
It seems to me that a lot of uncertainty is created by Reserve Banks spending 5 months telegraphing "I'm gonna do it, I'm gonna raise rates", as is currently seen in the USA.
This seems to be the case where everyone knows the rate is wrong, but…
Scott
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Does the PBoC work like the Fed in having meetings where they discuss changes in monetary policy?
The Fed has a specific schedule to its meetings about changing the Fed Funds Target Rate, does the PBoC perform the same as well?
Mike
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Do IRF of macroeconomic variable to monetary policy shock represent the "true" dynamic effects of monetary policy on the variable?
If the question needs clarification, I will be more than happy to revise.
Also, any help would be greatly appreciated.
EHMJ
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India and the Impossible Trilemma
This question is in the context of the impossible trilemma. India does not have full capital convertibility on its currency. According to the trilemma, it should be able to have an independent monetary policy and a stable exchange rate. Yet, India…
Kroose Smith
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When interest rates are historically and exceptionally low why are businesses still acting negatively to their increase?
Usually when interest rates rise businesses cannot borrow so the amount of capital they have available goes down which then means they hire fewer people and wages go down so inflation goes down.
This is why businesses react badly to rate increases…
Ash Rivers
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Where does the current debate stand on passive vs active monetary policy?
The debate between active and passive monetary policy is mentioned in most macroeconomics textbooks. Where does the current debate stand? Has a consensus been reached among economists? Do economists today broadly agree that one is better than the…
WorldGov
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