Essays on Monetary Policy

It is important to balance the economy of a country during the recession period. Monetary and fiscal policy plays a critical role in stabilizing the economy by shifting of the Aggregate Demand, right for the expansionary and left for the Contractionary.  The monetary policy always manipulates the growth rate in...

Real Interest Rate Real interest rate refers to the interest rate that a lender, a saver or an investor receives or expects to obtain after considering inflation. It is often described using the Fisher equation that asserts that real interest rate can be approximated by deducting the inflation rate from the...

Monetary Policy Monetary policy is the action taken by the Federal Reserve to achieve specific economic goals. The main targets are the inflation and the unemployment rate. Some of the tools used to achieve the goals are open market operations, the reserve requirement and the discount rate. The policies the Fed...

The government policy makers have to decide to increase the money supply or increase government spending to control the interest rate and aggregate output of the economy. Fiscal policy affects the aggregate demand and distribution of wealth through controlling the taxes and government spending. But when fiscal policy at controlling...

A nation’s Gross Domestic Product (GDP) shows the citizens’ economic stability and their living standards.  The GDP of a nation can be affected by various factors like the change in interest rates, inflation and adjustment in the demand and supply of goods and services. The government’s fiscal and monetary policies...

The Monetary Policy Committee (MPC) of the Bank of England has not been successful in maintaining inflation. Monetary policy refers to the use of interest rates and other tools to affect consumer spending and aggregate demand in the economy (Boneva, Weale and Wieladek 2016). Some of the monetary tools used...

Increasing the supply of money implies that more money has been pumped into the economy. Apparently, this is carried out by central banks of countries when they purchase securities and offer funds to financial institutions such as banks. As a consequence, this contributes toward lowering the rates of interest, and...

(a) Why do some economists claim that we should not worry too much about inflation? The economists claim that, as a result of the under-read measure of the inflation since they don’t take account of qualitative improvements over time. A small amount of inflation makes it possible to give adequate...

The Financial Crisis of 2008 The Financial Crisis of 2008 was as a result of deregulation of Financial Markets in the U.S, the U.K, and other Western European economies (Davies, H. 2010, 8) (Rant, Wilson, " Foundation, 2012, 16). Property prices rose steadily and this was profitable for banks and other...

The Mechanism and Transmission of Monetary Policy The mechanism and transmission of the monetary policy has become and major threat to the economic development and growth. In this regard, the monetary policy transmission can be referred to as the changes and amendments to the cash flow affect the economic growth, economic...

Financial institutions are businesses that facilitate monetary transactions. These organizations might be for-profit or non-profit. Currency exchange, lending facilities, deposits, and investments are among the transactions available. Financial institutions participate in the gathering of money from the general public and the investment of that money in assets such as bonds...

Inflation targeting is a monetary policy framework in which central banks set an explicit inflation rate and announce it publicly. This has advantages and disadvantages, which will be described in the paper. The ability to reconcile predictability and expectations is one of the key benefits of inflation targeting. This means that...