Monetary Policy

What is Monetary Policy? Briefly explain.

Monetary policy refers to changes made by the central bank to interest rates, quantity of money in order to achieve changes in aggregate demand that keeps inflation in target.

Objectives

Price Stability

Full employment

Economic growth

Exchange stability

Financial stability

Types:

Expansionary

Contractionary

Tools:

OMO

Interest rates

Discount rates

Interest of reserves

Reserve requirements

Quantitative Easing QE