goal of monetary policy

INTRODUCTION

BODY

CONCLUSION

Monetary Policy

The price stability goal

and the Nominal Anchor

• Monetary policy is the macroeconomic

policies which central banks made to

control and regulate the money supply to

the economy.

Expansionary policy

Contractionarypolicy

Expansionary policy

Contractionarypolicy

The money supply

The money supply

The money supply

Interest rates

Monetary policy is the process by which

the monetary authority of a country controls

the supply of money, often targeting a rate

of interest for the purpose of

promoting economic growth and stability.

Price Stability

Exchange rate Stability

Interest stability

Finance Market Stability

Economic growth

Reduce unemployment

1) Definition

Price stability = low and stable inflation

High Money value

Trust information

True decisions

Economic growth

Raising the productive potential of the economy.

Monetary policy can contribute to the allocative

efficiency of the capital market and thus increases the

incentives to invest

1) DefinitionNominal anchor = a nominal variable such as the

inflation rate or the money supply which ties down the

price level to achieve price stability.

2) The role of a Nominal Anchor

1• Maintain money value

2• Promote price stability

3

• Limit the time-inconsistency problem

1) DefinitionTime inconsistency problem is something we deal with

continually in everyday life. We often have a plan that we

know will produce a good outcome in the long run, but

when tomorrow comes , we just can’t help ourselves and

we renege on our plan, because doing so has short-run

gains.

Discretionary policy

Time-inconsistency

1

Even if a central

bank recognizes

that discretionary

policy will lead to

a poor outcome

2

It still may not be

able to pursue the

better policy of

inflation control

3

Because politicians

are likely to apply

pressure on the

central bank to try

to boost output

with overly

expansionary

monetary policy

A

nominal

anchor

A

true

policy

Method

Monetary policy: chính sách tiền tệ

Goal: mục tiêu

Price stability: ổn định giá

Regulation: quy tắc

Impact: tác động

Committee: ủy ban

Determine: xác định

Maintain: duy trì

Combat: chống lại

Expansionary policy: chính sách mở rộng

Contractionary policy: chính sách thắt chặt

Nominal anchor: neo danh nghĩa

Adherence: giữ vững

Narrow: hẹp

Discretionary policy: chính sách tùy ý (tùy nghi)

Pursue: theo đuổi

Expected constraint: giới hạn kỳ vọng

Time – inconsistency problem: vấn đề thời gian

không thống nhất

Recognize: nhận ra

Pressure: áp lực