A THEORETICAL APPROACH TO MONETARY POLICY STRATEGIES
Research Article
A THEORETICAL APPROACH TO MONETARY POLICY STRATEGIES
ABSTRACT
An equally important element of the new consensus is precisely the choice of the optimal one strategy that should be used to achieve the previous explanation of the ultimate goals of monetary policy. It is all due to impossibilities of the direct influence of monetary policy instruments on the ultimate goals, so that a particularly important issue that is the subject of theoretical considerations is the choice of adequate intermediate target. The target, as a link between the operational and ultimate goal of monetary policy plays a role in the leading indicator, because it registers them the changes in advance, but also the political indicator, because it reflects the intention of the central bank. Considering that monetary theory has accepted the thesis that they exist high costs of inflation due to the events that took place during the 70s years of the 20th century, an important element in achieving price stability is the existence of a nominal anchor. A nominal anchor represents a nominal variable embodied in inflation rate, money supply, exchange rate or nominal gross home product. The decision to choose an intermediate target variable depends exactly from which theory the central bank relies on when explaining it the transmission mechanism of monetary policy. Economic theory starts from several assumptions for successful application of this mode, the most significant of which refer to the necessity of the existence of constant speed of money circulation, as well as exogeneity of the money supply, that is its control by the central bank. Considering that the mentioned preconditions existed during the seventies, the strategy of the monetary target was then adopted in several developed countries, but had different results.
MUMINOVIC, H.,
(2023). A THEORETICAL APPROACH TO MONETARY POLICY STRATEGIES. Journal of Law And Politics, 4(2), 9-15. Arrival Date Posted By:https://jlp.ibupress.com/articles/a-theoretical-approach-to-monetary-policy-strategies
