(Online Course) Public Administration for IAS Mains Exams
Topic: Financial Administration: Monetary Policy
Monetary policy is the process by which the government, central bank, or monetary authority of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards in growth and stability of the economy. Momentary theory provides insight into how to craft optimal monetary policy.
The other primary means of conducting monetary policy include: (i) Discount window lending (lender of last resort); (ii) Fractional deposit lending (changes in the reserve requirement); (iii) Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) “Open market operations” (talking monetary policy with the market).
Objectives of Monetary Policy
1. Maximizing growth rates
2. Ensuring price stability
3. Increasing employment opportunities
4. Managing exchange rate stability