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monetary policy Report

monetary policy Report

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Published by bhargavchotu15534
its a fine report regarding monetary instruments
its a fine report regarding monetary instruments

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Published by: bhargavchotu15534 on Mar 15, 2010
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06/19/2014

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M.S.RAMAIAH INSTITUTE OF MANAGEMENT
CHANGE IN OBJECTIVES OFMONETARY POLICY AND USEOF MONETARY INSTRUMENTS
Macroeconomics Project Report
PGDBM-AGROUP-3TeamMembers
091103091113091123091133091143091153Abu baker Bhargav shaker Kulubushan prasadPriyanka sumanSandeep gangulySumana mitra
 
Contents
MONETARY POLICY...............................................................................................................................3OBJECTIVES OF MONETARY POLICY.................................................................................................4MONETARY INSTRUMENTS..................................................................................................................5QUANTITATIVE INSTRUMENTS...........................................................................................................5QUALITATIVE INSTRUMENTS..............................................................................................................5CASH RESERVE RATIO...........................................................................................................................6STATUTORY LIQUDITY RATIO............................................................................................................9OPEN MARKET OPERATIONS.............................................................................................................12BANK RATE............................................................................................................................................14REPO RATE.............................................................................................................................................16REVERSE REPO RATE...........................................................................................................................16QUALITATIVE INSTRUMENTS............................................................................................................19MORAL SUSAION..................................................................................................................................19CREDIT RATIONING..............................................................................................................................19SELECTIVE CREDIT CONTROL...........................................................................................................20DIRECT ACTION.....................................................................................................................................20REFERENCES..........................................................................................................................................21REFERENCES
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MONETARY POLICY
Monetary policy rests on the relationship between the rates of interest inan economy, that is the price at which money can be borrowed, and thetotal supply of money. Monetary policy uses a variety of tools to controlone or both of these, to influence outcomes like economicgrowth, inflation, exchange rates with other currencies andunemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through bankswhich are tied to a central bank, the monetary authority has the ability toalter the money supply and thus influence the interest rate (to achieve policy goals). The beginning of monetary policy as such comes from thelate 19th century, where it was used to maintain the gold standard.A policy is referred to as contractionary if it reduces the size of themoney supply or raises the interest rate. An expansionary policyincreases the size of the money supply, or decreases the interest rate.Furthermore, monetary policies are described as follows:accommodative, if the interest rate set by the central monetary authorityis intended to create economic growth; neutral, if it is intended neither tocreate growth nor combat inflation; or tight if intended to reduceinflation, generally RBI announces monetary policy twice in a year during slack session (April-september) and busy session (October-march).
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