Monetary Policy and Strategies to Overcome the Crisis

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Submitted By heyyas
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Monetary Policy and strategies to overcome the crisis
Monetary policy is the process by which the government , the central bank or the monetary authority of the country controls:
• The supply of money,
• The availability of money,
• The cost of money or interest rate, in order to attain a set of long term/short term objectives oriented towards the growth and stability of the economy.
The central banks, ECB (European Central Bank) in Europe and FED (Federal Reserve System) in the USA, have the task of executing the monetary policy.
The primary objective of the Eurosystem and of the single monetary policy is to maintain the price stability as said in the Article 105 of the Treaty establishing the European Community:
“Without prejudice to the objective of price stability”, the Eurosystem will also “support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community”. These includes a “high level of employment” and “sustainable and non-inflationary growth”.
Price stability is important to achieve a favourable economic environment and a high level of employment.
To overcome the crisis, it is necessary to intervene in the financial regulation, institutions and firms governance, transactions and legislator moral conduct and especially in the economic policy.
It is important to analyse the economic policies and how they contributed to the imbalances, that caused the crisis.
Monetary policy influenced the trend of the financial markets favouring the “bolla finanziaria”. This led to a new definition of the monetary policy.
Nowadays the debate about the monetary policy regards two aspects:
1. Monetary policy tools: recently central banks used the so called “inflation targeting”. This method was based on the prevision of the inflation thanks to an economic model and on the interest rate…...

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