Monetary Policy
Candy(35450) & Carrie(34950)

Outline
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Definition



Justification-Why we chose MP

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Expansionary MP VS contractionary MP

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Objectives



Tools

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Conclusion

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Question time

Definitio n • Monetary policy is the actions of a central bank which involves management of money supply and interest rate to guide healthy economic growth and to achieve macroeconomic objectives.
(Senn 1999, p.339)

http://www.emeraldinsight.com/doi/pdfplus/10.1108/01443589910284921

Justification
•

Choosing MP is beneficial for our future study.

E.g.
•

Monetary and Financial Policies

•

International Monetary Policy

http://www.emeraldinsight.com/doi/pdfplus/10.1108/01443589910284921

Expansionary MP
VS
expansionary MP http://www.emeraldinsight.com/doi/pdfplus/10.1108/01443589910284921 Expansionary MP
• Increasing the supply of money
• Decreasing the reserve requirement
• Decreasing the interest rate
E.g. The Great Depression and the New Deal
(Rawdanowicz, Bouis & Watanabe 2013, p.24)

http://www.oecd­ilibrary.org/docserver/download/5k41zq8lwj9v.pdf? expires=1432636187&id=id&accname=guest&checksum=D6D83BB2BC381FD101E86AAC9CC5AD99 Contractionary MP
• Decreasing the supply of money
• Increasing the reserve requirement
• Increasing the interest rate
(Rawdanowicz, Bouis & Watanabe 2013, p.24)

http://www.oecd­ilibrary.org/docserver/download/5k41zq8lwj9v.pdf? expires=1432636187&id=id&accname=guest&checksum=D6D83BB2BC381FD101E86AAC9CC5AD99 Monetary
Policy
Objectives
Tools
Conclusion

Objectives
•

Price stability

•

Full employment

•

Economic growth

(McTaggart, Findlay & Parkin 2013, p.643)

Price Stability
Inflation
Government target

Interest rates Government target
Inflation

Interest rates http://onlinelibrary.wiley.com/doi/10.1111/jmcb.12156/abstract;jsessionid=F6BAE9DEE94578F9C9049D44AB5B2121.f03t03?deniedAccessCustomisedMessage=&use

Full Employment
•