2. Monetary Policy
According to Prof. Harry Johnson,
"A policy employing the central banks control of the
supply of money as an instrument for achieving the
objectives of general economic policy is a monetary
policy."
3. Monetary Policy
Meaning of Monetary Policy :-
Monetary policy refers to the measures which the
central bank of the country takes in controlling the
money and credit supply in the country with a view
to achieving certain specific economic objectives
4. Objectives of Monetary Policy
1. Control of Inflation and Deflation :-
Inflation and deflation both are not suitable for the economy. If
the price level is reasonable and there is an adjustment between
the price and cost, rate of out put can increase. Monetary policy
is used to coordinate the cost and price. So price stability is
achieved through the monetary policy.
2. Exchange Stability :-
Monetary policy second objective is to achieve the stable foreign
exchange rate. If the rate of exchange is stable it shows that
economic condition of the country is stable.
5. 3. Economic Development :-
Monetary policy plays very effective role in
promoting economic growth by providing adequate
credit to productive sectors.
4. Increase in the Rate of Employment :-
Monetary policy another objective is to achieve full
employment but without inflation.
.
6. 5. Equal Distribution of Credit :-
Monetary policy should also ensure that distribution
of credit should be equitable and purposeful. The
credit priority should be given to backward areas
6. Improvement in Standard of Living :-
It is also the major objective of the monetary policy
that it should improve the quality of life in the
country
8. Quantitative measures
Bank Rate Policy (BRP)
Open Market Operation (OMO)
Cash reserve ratio (CRR)
Statutory liquidity ratio (SLR)
9. Qualitative Measures
Consumer Credit Regulation
Moral Suasion
Direct Action
Discriminatory Rate Of Interest
Minimum Margin Requirement
10. OPEN MARKET OPERATIONS
Open Market Operation: An Open Market Operation is
an instrument of monetary policy which involve buying and
selling of government securities from or to the public and
bank.
Govt. securities like- shares of govt. company, Gold,
Foreign currency and all high worth assets.
Another name for Govt. securities is Gilt Edge Securities.
Individuals, corporates , Financial institutions can buy.
At the time of Inflation the Govt. sells the securities.
11. HOW IT WORKS
Inflation
Borrowings Investment Production Employment
Income Demand Price
Deflation
Borrowings Investment Production
Employment Income Demand Price
12.
13.
14. EFFECTIVENESS OF MONETARY
POLICY ON INDIAN ECONOMY
Evidence of growth .
Reining in inflation and containment
of inflation expectations.
Assurance of financial stability .