Financial Market

1. Monetary Policy

2.  Purpose of Monetary Policy:
 Stability in the price level
 High employment
 Economic growth
 Stability in foreign currency exchange rate
 Stable interest rate

3.  Conflict Among Monetary Policy:
 Conflict economic growth vs interest rate
 Inflation vs price stability
 Central bank has no direct control.

4. Roles of Central Bank in the Economy and Financial
System:
 Control the money supply to avoid severe inflation.
 Stabilizing the money and capital market.
 Lender of last resort and supervision of the banking system
 Maintaining and improving the payment mechanism.

5. Key Focus of CB in Monetary Policy:
 Interest rate
 Reserve
 Money supply

6.  Credit Control System:
1. General credit control
 Open market operation
 Reserve requirements
 Discount rate
2. Selective credit control
 Moral suasion
 Margin requirements

7.  Characteristics of Money market:
1. Safety
2. Liquidity
3. Speedy
 Need for Money Market:
1. It meets short term requirements of the borrowers
2. Functioning smoothly fosters
3. It is reasonable access to users.

8.  Participants of Money Market:
• Central govt.
• State govt.
• Public sector undertakings
• Scheduled commercial bank
• Private sector companies
• Non bank financial institutions
• Hedger
• Speculator.

9. Good Luck