Page 221 - DECO201_MACRO_ECONOMICS_ENGLISH

Macro Economics Pavitar Parkash Singh, Lovely Professional University

Notes Unit 13: Macro Economic Policies: Monetary Policy

CONTENTS
Objectives
Introduction

13.1 Objectives and Relevance of Monetary Policy
13.2 Instruments of Monetary Policy
13.2.1 Quantitative or General Techniques

13.2.3 Qualitative or Selective Techniques
13.3 Transmission of Monetary Policy
13.3.1 Monetary Policy in Developing Economy
13.3.2 Monetary Policy in an Open Economy
13.4 Effectiveness of Monetary Policy

13.4.1 Effects of Monetary Policy on Inflation in India
13.4.2 What is RBI doing to Curb Inflation?
13.5 Summary

13.6 Keywords
13.7 Review Questions
13.8 Further Readings

Objectives

After studying this unit, you will be able to:
State the objectives and relevance of monetary policy;

Identify the instruments of monetary policy;
Explain the transmission of monetary policy;
Discuss the features of monetary policy in developing economies;

Describe the conduct of monetary policy in open economies.
Introduction

Monetary policy is an important economic tool of Macro Economic policy of a country. It is
formulated and implemented by the central bank of a country through wide network of financial
institutions. It is designed with an objective to take care of economic conditions and to avoid any
policy conflicts for achieving overall efficiency in the economy. Monetary policy includes all
measures, which affect money supply, liquidity, cost and availability of credit.
In advanced countries, central authority or central bank only performs the function to control
money market in order to bring reasonable degree of stability. On the contrary, in developing
countries it plays a pioneer and dynamic role in accelerating economic growth with stability

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