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What do monetarists believe the fed should do in terms of monetary policy?
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What policies would likely be favored by a monetarist?
A monetarists would favor a policy where the government had a limited role in the control of the circulation of money. They believe that the money supply should not be excessively expanded so it does not cause inflation.
What is the main idea in monetarism?
Monetarists believe that changes in the money supply affect the level of production in a country in the short-run but only affect the price-level in the long run. One key outcome of monetarist thought is about the optimal level of interest rates and thus real money supply: social welfare is maximised when interest rates are equal to 0 and at the level of real money supply which provides this rate. In general, this means two things: 1) that inflation is the result of money supply changes; 2) that inflation has welfare losses due to reallocation of assets. Monetarists believe the government purposely uses the money supply to create inflation to provide some level of revenue for itself, since inflation created by printing money is known as an 'inflation tax' and provides the government with money whose cost is borne by the public. Monetarists believe that the government should not interfere in monetary policy and that they should keep the money supply constant such that the interest remains 0 in the long-run, thus minimising welfare loss.
What is the lean against the wind policy?
Use monetary policy to counteract the expansionary phase of the business cycle. Intention is to tighten policy in a way to restrain the credit cycle on the upside, with a view to mitigating the magnitude of the subsequent downturn. William R. White, "Should Monetary Policy "Lean or Clean"" Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute, Working Paper No 34 (August 2009)
What should the reserve bank do if it wants to pursue a contractionary monetary policy?
raise interest rates & sell securities
Should the Fed continue to set monetary policy or should elected officials take direct control?
The Fed should continue, who can ever trust a politician.
What policies would likely be favored by a monetarist?
A monetarists would favor a policy where the government had a limited role in the control of the circulation of money. They believe that the money supply should not be excessively expanded so it does not cause inflation.
What is the main idea in monetarism?
Monetarists believe that changes in the money supply affect the level of production in a country in the short-run but only affect the price-level in the long run. One key outcome of monetarist thought is about the optimal level of interest rates and thus real money supply: social welfare is maximised when interest rates are equal to 0 and at the level of real money supply which provides this rate. In general, this means two things: 1) that inflation is the result of money supply changes; 2) that inflation has welfare losses due to reallocation of assets. Monetarists believe the government purposely uses the money supply to create inflation to provide some level of revenue for itself, since inflation created by printing money is known as an 'inflation tax' and provides the government with money whose cost is borne by the public. Monetarists believe that the government should not interfere in monetary policy and that they should keep the money supply constant such that the interest remains 0 in the long-run, thus minimising welfare loss.
What is the lean against the wind policy?
Use monetary policy to counteract the expansionary phase of the business cycle. Intention is to tighten policy in a way to restrain the credit cycle on the upside, with a view to mitigating the magnitude of the subsequent downturn. William R. White, "Should Monetary Policy "Lean or Clean"" Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute, Working Paper No 34 (August 2009)
Definition of monetary policies?
Monetary policy is referred to as either being an expansionary policy, or a contractionary policy, where an expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy involves raising interest rates in order to combat inflation. Monetary policy should be contrasted with fiscal policy, which refers to government borrowing, spending and taxation. More useful Information here: www.vinayakjobs.com .
What should the reserve bank do if it wants to pursue a contractionary monetary policy?
raise interest rates & sell securities
Should the Fed continue to set monetary policy or should elected officials take direct control?
The Fed should continue, who can ever trust a politician.
What is a main goal of the Federal Reserve in its monetary policy?
Meaning of Monetary PolicyThe term monetary policy is also known as the 'credit policy' or called 'RBI's money management policy' in India. How much should be the supply of money in the economy? How much should be the ratio of interest? How much should be the viability of money? etc. Such questions are considered in the monetary policy. From the name itself it is understood that it is related to the demand and the supply of money. Definition of Monetary PolicyMany economists have given various definitions of monetary policy. Some prominent definitions are as follows.According to Prof. Harry Johnson,"A policy employing the central banks control of the supply of money as an instrument for achieving the objectives of general economic policy is a monetary policy."According to A.G. Hart,"A policy which influences the public stock of money substitute of public demand for such assets of both that is policy which influences public liquidity position is known as a monetary policy."From both these definitions, it is clear that a monetary policy is related to the availability and cost of money supply in the economy in order to attain certain broad objectives. The Central Bank of a nation keeps control on the supply of money to attain the objectives of its monetary policy.Objectives of Monetary PolicyThe objectives of a monetary policy in India are similar to the objectives of its five year plans. In a nutshell planning in India aims at growth, stability and social justice. After the Keynesian revolution in economics, many people accepted significance of monetary policy in attaining following objectives.1. Rapid Economic Growth2. Price Stability3. Exchange Rate Stability4. Balance of Payments (BOP) Equilibrium5. Full Employment6. Neutrality of Money7. Equal Income DistributionThese are the general objectives which every central bank of a nation tries to attain by employing certain tools (Instruments) of a monetary policy. In India, the RBI has always aimed at the controlled expansion of bank credit and money supply, with special attention to the seasonal needs of a credit.Let us now see objectives of monetary policy in detail :-1. Rapid Economic Growth : It is the most important objective of a monetary policy. The monetary policy can influence economic growth by controlling real interest rate and its resultant impact on the investment. If the RBI opts for a cheap or easy credit policy by reducing interest rates, the investment level in the economy can be encouraged. This increased investment can speed up economic growth. Faster economic growth is possible if the monetary policy succeeds in maintaining income and price stability.2. Price Stability : All the economics suffer from inflation and deflation. It can also be called as Price Instability. Both inflation are harmful to the economy. Thus, the monetary policy having an objective of price stability tries to keep the value of money stable. It helps in reducing the income and wealth inequalities. When the economy suffers from recession the monetary policy should be an 'easy money policy' but when there is inflationary situation there should be a 'dear money policy'.3. Exchange Rate Stability : Exchange rate is the price of a home currency expressed in terms of any foreign currency. If this exchange rate is very volatile leading to frequent ups and downs in the exchange rate, the international community might lose confidence in our economy. The monetary policy aims at maintaining the relative stability in the exchange rate. The RBI by altering the foreign exchange reserves tries to influence the demand for foreign exchange and tries to maintain the exchange rate stability.4. Balance of Payments (BOP) Equilibrium : Many developing countries like India suffers from the Disequilibrium in the BOP. The Reserve Bank of India through its monetary policy tries to maintain equilibrium in the balance of payments. The BOP has two aspects i.e. the 'BOP Surplus' and the 'BOP Deficit'. The former reflects an excess money supply in the domestic economy, while the later stands for stringency of money. If the monetary policy succeeds in maintaining monetary equilibrium, then the BOP equilibrium can be achieved.5. Full Employment : The concept of full employment was much discussed after Keynes's publication of the "General Theory" in 1936. It refers to absence of involuntary unemployment. In simple words 'Full Employment' stands for a situation in which everybody who wants jobs get jobs. However it does not mean that there is a Zero unemployment. In that senses the full employment is never full. Monetary policy can be used for achieving full employment. If the monetary policy is expansionary then credit supply can be encouraged. It could help in creating more jobs in different sector of the economy.6. Neutrality of Money : Economist such as Wicksted, Robertson have always considered money as a passive factor. According to them, money should play only a role of medium of exchange and not more than that. Therefore, the monetary policy should regulate the supply of money. The change in money supply creates monetary disequilibrium. Thus monetary policy has to regulate the supply of money and neutralize the effect of money expansion. However this objective of a monetary policy is always criticized on the ground that if money supply is kept constant then it would be difficult to attain price stability.7. Equal Income Distribution : Many economists used to justify the role of the fiscal policy is maintaining economic equality. However in resent years economists have given the opinion that the monetary policy can help and play a supplementary role in attainting an economic equality. monetary policy can make special provisions for the neglect supply such as agriculture, small-scale industries, village industries, etc. and provide them with cheaper credit for longer term. This can prove fruitful for these sectors to come up. Thus in recent period, monetary policy can help in reducing economic inequalities among different sections of society.Articles on Monetary Policy1. Instruments of Monetary Policy.2. Limitations of Monetary Policy.3. Recent Reforms in Monetary Policy.4. Evaluation of Monetary Policy.
What has the author Otmar Issing written?
Otmar Issing has written: 'The birth of the Euro' -- subject(s): Monetary policy, Euro area, Economic integration, Euro 'The Eurosystem (CEPR Policy Paper)' 'Kleineres Eigentum' -- subject(s): Property, Wealth 'Should We Have Faith in Central Banks' 'Der Euro' -- subject(s): European Central Bank, Monetary policy, Monetary unions 'Central Bank Independence and Monetary Stability' 'Der Rediskontkredit' -- subject(s): Banks and banking, Deutsche Bundesbank, Discount, Monetary policy 'Indexklauseln und Inflation' -- subject(s): Wages, Inflation (Finance), Cost and standard of living, Cost of living adjustments
What group of people believe that the US should stay out of the Europeans policy?
Isolationist
How does the government cure inflation?
in the inflation situation government should careful about the expenditure. Government should exercise monetary policy . it will help to implement investment. imran ali, student ,p.u ,bangladesh
Limitations of reserve bank of India?
1. There exist a Non-Monetized SectorIn many developing countries, there is an existence of non-monetized economy in large extent. People live in rural areas where many of the transactions are of the barter type and not monetary type. Similarly, due to non-monetized sector the progress of commercial banks is not up to the mark. This creates a major bottleneck in the implementation of the monetary policy.2. Excess Non-Banking Financial Institutions (NBFI)As the economy launch itself into a higher orbit of economic growth and development, the financial sector comes up with great speed. As a result many Non-Banking Financial Institutions (NBFIs) come up. These NBFIs also provide credit in the economy. However, the NBFIs do not come under the purview of a monetary policy and thus nullify the effect of a monetary policy.3. Existence of Unorganized Financial MarketsThe financial markets help in implementing the monetary policy. In many developing countries the financial markets especially the money markets are of an unorganized nature and in backward conditions. In many places people like money lenders, traders, and businessman actively take part in money lending. But unfortunately they do not come under the purview of a monetary policy and creates hurdle in the success of a monetary policy.4. Higher Liquidity Hinders Monetary PolicyIn rapidly growing economy the deposit base of many commercial banks is expanded. This creates excess liquidity in the system. Under this circumstances even if the monetary policy increases the CRR or SLR, it dose not deter commercial banks from credit creation. So the existence of excess liquidity due to high deposit base is a hindrance in the way of successful monetary policy.5. Money Not Appearing in an EconomyLarge percentage of money never come in the mainstream economy. Rich people, traders, businessmen and other people prefer to spend rather than to deposit money in the bank. This shadow money is used for buying precious metals like gold, silver, ornaments, land and in speculation. This type of lavish spending give rise to inflationary trend in mainstream economy and the monetary policy fails to control it.6. Time Lag Affects Success of Monetary PolicyThe success of the monetary policy depends on timely implementation of it. However, in many cases unnecessary delay is found in implementation of the monetary policy. Or many times timely directives are not issued by the central bank, then the impact of the monetary policy is wiped out.6. Monetary & Fiscal Policy Lacks CoordinationIn order to attain a maximum of the above objectives it is unnecessary that both the fiscal and monetary policies should go hand in hand. As both these policies are prepared and implemented by two different authorities, there is a possibility of non-coordination between these two policies. This can harm the interest of the overall economic policy.These are major obstacles in implementation of monetary policy. If these factors are controlled or kept within limit, then the monetary policy can give expected results. Thus though the monetary policy suffers from these limitations, still it has an immense significance in influencing the process of economic growth and development.
Who did radical republicans believe should be in charge of the reconstruction policy?
Legislative branch
