UK Monetary Policy Regime Essay Example | Topics and Well Written Essays - 2500 words

UK Monetary Policy administration - Essay ExampleThis paper illustrates that Monetary Policy can be broadly defined as the deliberate effort by the Central Bank to influence economical activity by variations in the money supply, in the availability of identification or in the sideline rates consistent with the precise national objectives. Money serves as a ordinary of exchange, as a store of value, a measuring for measuring values and a unit of account. The role of money is to serve as a medium of exchange, and it is the medium with which everything can be bought and sold. The pecuniary insurance of any country refers to the regulatory policy, whereby the monetary authority maintains its control over the supply of money for the realization of general economic objectives. This involves manipulating the supply of money, the level, and coordinate of interest rates and other conditions affecting the availability of credit. However, in the context of developing economies, monetar y policy acquires a wider role and it has to be designed to meet the particular requirements of the economy. This involves not merely the restriction of credit expansion to curb inflation, but also the provision of adequate funds to meet the legitimate requirements of application and trade and curbing the use of credit for unproductive and speculative purposes. The monetary policy of an economy operates through three important instruments, viz. the regulation of money supply, control over aggregate credit and the interest rate policy. Economic growth is dependent on mobilizing savings and directing them into productive channels. In this process, money supply can only play a limited role. However, the role establishes an important connection among money supply, output and price level (ICFAI Center for Management Research (ICMR)). These relationships cannot be ignored blush if the primary concern of the government is the mobilization of real factors that ultimately lead to economic growth. A wizard objective of any central bank is to safeguard the value of the currency in terms of what it leave behind purchase. Rising prices inflation reduces the value of money. Monetary policy is directed to achieving this objective and providing a framework for non-inflationary economic growth.