Monetary Polcy

MONETARY POLICY

Study Report

Table of Contents

Overview 3

Introduction 3

Distinction Between Monetary and Credit Policy 3

Objectives of Monetary Policy 3

Factors Influencing the Monetary Policy 4

Instruments of Monetary Policy 4

Quantitative Credit Control Instruments 5

Qualitative Credit Control Instruments 5

Indicators and Targets of Monetary Policy 5

Indicators 5

Targets 6

Objectives Revisited 6

Conflicting Objectives (Policy Interactions) 8

Price Stability and Economic Growth 8

Full Employment and Price Stability 8

Economic Growth and Full Employment 8

Coordination of Objectives 8

Monetary Policy by RBI – Tools and Rates Primer 9

Monetary policy tools (To Be Reviewed – TODO) 10

Overview

Monetary Policy along with Fiscal Policy consist of two most important Tools employed by a nation to govern and manage its economic roadmap. This Report presents a detailed study of Monetary Policy of the Central Banks, its objectives, constituents, factors, instruments, indicators, interplay of policy actions, and finally the limitations of the Monetary Policy. It also presents a brief look into the Credit Policy announced by RBI for the First Quarter.

Introduction

Monetary Policy is that which related to the deliberate and conscious management of monetary variables in order to attain certain objectives. Harry G Johnson has defined monetary policy as a “policy employing the central bank’s control of the supply of money as an instrument for achieving certain given objectives of general economic policy”. It refers to the use of those official monetary policy instruments which are at the disposal of the central bank to regulate the availability, cost and use of money and credit with the object to achieve the optimum levels of output and employment, price stability, balance of payments equilibrium, etc

1 Distinction Between Monetary and Credit Policy

In the strict sense there is a distinction between the monetary policy and the...