Monetary Policy and Economy Research Paper

Open, View, and/or
Download this Document

Total Length: 1931 words ( 6 double-spaced pages)

Total Sources: 5

Page 1 of 6

International Capital Movements

In accordance to Milton Friedman, one of the downsides of activist monetary policy was the transmission of lengthy and variable lags. What is more, Friedman considered the effects of this monetary policy to be unpredictable. On the other hand, contemporary consensus is that the effective conduct of monetary policy ought to be done because of the perspective that the integrity of the central bank is essential and pivotal. This is for the reason that solely methodical central bank behavior in line with an interpretable imperative that exemplifies a dedication to price stability can offer a dependable security for private sector prospects. The article by Mishra et al. (2012) examines the manner in which the different conventional channels of monetary transmission are expected to operate in the financial setting that is disposed to portray low-income countries.

The emphasis of the article lies on the impact of the financial market structure on monetary transmission. In totality, Mishra et al. (2012) indicate that the weak structure of institutions that is largely perceived in low-income countries has a diminishing impact on the role that security markets play. As a result, the customary monetary transmission via market interest rates and market-oriented asset prices end up being weak or absent. What is more, this causes the exchange rate channel of monetary transmission to be destabilized by substantial central bank intervention in the foreign exchange market.

One of the strengths of this article is that it considers all the various elements required in an institutional set up for monetary transmission. Through a process of elimination, the authors make a determination that the bank lending channel continues to be the most general idea and means for monetary transmission in low income countries. In turn, the study undertakes evidence across nations regarding the effectiveness of different phases in the bank lending channel in nations at various levels of income. Another strong suit of the article is that it encompasses an extensive VAR-based empirical literature that delves into the influences of monetary policy inventions in a majority of individual low income countries. This makes it possible to delineate that an environment in which domestic monetary policy is weak and undependable is one in which the central bank should confine activist urges (Mishra et al., 2012). In addition, the article is properly outlined and the information provided by the authors is in good flow, which makes it much easier for the audience to follow and understand.

However, the article does have its shortcomings. One of the limitations of the studies is that the authors fail to delineate what should be a typical or characteristic monetary transmission in a low-income country.

Stuck Writing Your "Monetary Policy and Economy" Research Paper?

View All Our Example Monetary Policy and Economy Research Paper

Have A Custom Example Essay Written

In addition, the article makes a substantial assumption that for majority of the nations, the framework instituted fails to have an independent central bank or have markets that are well-functioning and highly liquid (Mishra et al., 2012). The recommendation made for future research encompasses the examination of whether conducting discretionary monetary policy in low-income countries will have a positive impact. This is to take into consideration whether it will give rise to the desired inflation targets, the selected exchange rate administrations and also the desired constraints to the capital account.

The article by Hogan (2012) examines both conventional and unconventional monetary policies and the manner in which these policies were implemented to tame the financial crisis. In particular, during the course of the 2008 financial crisis, the Federal Reserve implemented unconventional policies that perchance help in recuperating the financial system and ensuring there was no collapse or disintegration. However, the article also points out that these policies might have given rise to extensive concerns for several years to come (Hogan, 2012). One of the key strengths of this article is that it delineates the entirety of the financial crisis, ranging from its background, its causes and consequences and also the aftermath of the financial crisis. This makes it much easier for the audience to follow the process and as a result have a clear understanding of the impact of the monetary policy, not only its prospective influence prior to the crisis and in the course of the crisis, but also the forthcoming periods subsequent to the crisis (Hogan, 2012). In addition, to a certain extent on top of accomplishing its decrees to promote economic growth and uphold stable prices, the Fed made credits to particular financial institutions, acknowledged up till then ineligible security, and acquired bonds that massively inflated its balance sheet and generated exceptional levels of excess bank reserves. The strong suit of the article is that it outlines how these events happened and their prospective significances (Hogan, 2012). Another strength of the article takes into account the proper illustration of elements linked to monetary policy, for instance the balance sheet composition of the Federal Reserve, net interest outlays and also the market rates set by the Fed. This makes it possible for the audience to have a clear indication of the impact of the monetary policy implementation between the years 2008 and 2011.

The article by Adam (2012) examines whether owing to the outcome of these economic turmoil, the implementation of the monetary policy means the need for a far-reaching change, or simply reconsidering aspects regarding the key structure of the monetary.....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Monetary Policy And Economy" (2016, November 30) Retrieved May 12, 2024, from
https://www.aceyourpaper.com/essays/monetary-policy-economy-2162921

Latest MLA Format (8th edition)

Copy Reference
"Monetary Policy And Economy" 30 November 2016. Web.12 May. 2024. <
https://www.aceyourpaper.com/essays/monetary-policy-economy-2162921>

Latest Chicago Format (16th edition)

Copy Reference
"Monetary Policy And Economy", 30 November 2016, Accessed.12 May. 2024,
https://www.aceyourpaper.com/essays/monetary-policy-economy-2162921
   

Open, View, and/or
Download this Document
order custom essay example