Monitory policy of Bangladesh Bank

2. Name ID
Md. Sujan Sarker 130106014
Nurjahan Islam Ritu 130106020

3. Introduction:
Monetary Policy the policy adopted by the central
bank for control of the supply of money as an
instrument for achieving the objectives of general
economic policy. With the shifts of the policy stance
of the government in various phases, necessary
adjustments were made in the country's monetary
policy. The Department of Research in the
Bangladesh Bank plays an important role in the
formulation of economic policies of the country.
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4. History of Monetary Policy
In old times, monetary policy was mainly focused on
seioniorage with the aim to maintain the value of
money
Inflation was not a big concern
Bank of England created in 1694
During 1870 – 1920 industrialized nations set up
central banks
Monetary policy came into question during the great
depression
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5. Monetary Policy
Can be-
Loose or
Tight
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6. Loose monetary policy
If the Bangladesh Bank (BB) implements a loose
monetary policy (often called expansionary) ,
the supply of credit increases and its cost falls.
A loose monetary policy is often implemented as
an attempt to encourage economic growth.
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7. Tight monetary policy
If the BB allows a tight monetary policy (often
called contractionary), the supply of credit
decreases and its cost increases.
Why would any nation want a tight money policy?
In order to control inflation
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8. 8
The Two Faces of Monetary PolicyThe Two Faces of Monetary Policy

9. How is the money supply controlled
The Central Bank generally uses three tools
 Open market operation (OMO)
 Discount rate (DR)
 Reserve ratio (RR)
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10. The Issue of Credibility
Monetary policy has important goals for the country
If these goals are not achieved, then operation of the
monetary policy tools are not effective
People do not have faith in monetary policy anymore
Monetary policy lose credibility
Country’s development objectives fall into chaos
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11. Limitations of Monetary Policy
Does not work when aggregate demand needs to be
stimulated through direct government spending
(Great Depression)
Works on the economy through indirect channels.
Therefore, often suffers from lag to have impact
May be dominated by fiscal policy
Wrong policy may result in severe damage for the
economy
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12. Conclusion
The monetary policy in Bangladesh aim at growth,
stability and social justice. After the Keynesian
revolution in economics, many people accepted
significance of monetary policy .
Although the long term focus of monetary policy in
Bangladesh is on growth with stability, the short-term
objectives are determined after a careful and realistic
appraisal of the current economic situation of the
country.
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