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CHETANAS

HAZARIMAL SOMANI
COLLEGE OF COM.&. ECO
SMT.KUSUMTAI
CHAUDHARI
COLLEGE OF ARTS
(CSFC)
ENVIRONMENT OF FINANCIAL SYSTEM

TOPIC:



Under the guidance of :-
Prof.Ritesh Sancheti

PRESENTORS
SAROJINI
ARKAL
(101)
MANISHA
BASNIWAL
(102)
MICHELLE
GONSALVES
(107)
KRISHNA
TIWARI
(121)
INTRODUCTION
MEANING & DEFINITION
OBJECTIVE OF MONETARY POLICY
IMPORTANCE OF MONETARY POLICY
TYPES OF MONETARY POLICY
MONETARY POLICY TERM
WHEN MONETARY POLICY ANNOUNCED
ADVANTAGES & DISADVANTAGES OF MONETARY POLICY
KEY INDICATORS
CONCLUSION


INTRODUCTION
Monetary policy is the process by which the
government, central bank, or monetary authority of a
country controls:
1.the supply of money,
2.availability of money, and
3. cost of money or rate of interest
The official goals usually include relatively stable prices
and low unemployment
Monetary policy differs from fiscal policy, which refers
to taxation, government spending, and associated
borrowing.
MEANING & DEFINITION
The actions of a central bank, currency board or other
regulatory committee that determine the size and rate
of growth of the money supply, which in turn affects
interest rates.
Monetary policy is maintained through actions such as
increasing the interest rate, or changing the amount of
money banks need to keep in the vault (bank
reserves).
Monetary policy is an important micro economic
instrument through which the micro economic
objectives of a country is sought to be achieved.

OBJECTIVE OF MONETARY POLICY
ECONOMIC GROWTH
PRICE STABILITY
EXCHANGE RATE STABILITY
EQUILIBRIUM IN THE BALANCE
OF PAYMENT
DEVELOPING BANKING &
FINANCIAL INSTITUTION
FULL EMPLOYMENT

ECONOMIC GROWTH:
Sustained economic growth is the basic as well as the
prime objective of monetary policy in all countries; rich as well as
the poor. Sustained economic growth refers to a continues growth
in the productive capacity of the economy resulting in a continues
growth in the total quantity of goods and services reduce in an
economy.

PRICE STABILITY:
Monetary policy must aim at avoiding the peaks of the
business problem. During a period of rapid rise in prices, export
fall and import raises thereby creating balance of payment
problem. Finally, inflation encourages unproductive investment in
gold, real estate and the stock markets.


EXCHANGE RATE STABILITY:
Stability in the foreign exchange rate imparts international
confidence in the value of the domestic currency and promotes a
sustained growth in the international trade. A fall in the exchange
rate is caused by an excess demand for foreign exchange over its
supply.

EQUILIBRIUM IN THE BALANCE OF PAYMENT:
Exchange rate stability and equilibrium in the balance of
payment are inter-linked. Fall in the money supply would also
reduce domestic prices on account of reduced domestic demand.
Lesser domestic prices will lead to increase in the demand for
exports.

DEVELOPING BANKING & FIANACIAL INSTITUTION:
Development of banking and financial in a developing
country is required to encourage, mobilize and channelize
savings for capital formation. Monetary policy help in controlling
inflation or achieving price stability, maintaining stable exchange
rate and equilibrium in balance of payment.

FULL EMPLOYMENT:
The central banks monetary policy must be geared to
achieve full employment of all the available productive resources
in the economy. It has been accepted by the economist that
about three per cent un employment is actually full employment
and that absolute full employment is only a theoretical possibility
propounded by the classical economists like JB Say and others.


IMPORTANCE OF MONETARY POLICY
Monetary policy plays a crucial role in moulding the
economic character of a country.
Monetary policy can also help in correcting ills of the
economy such as inflation and deflation.
Monetary policy and management have an active role to
play in a scheme for planning economic development of a
country.
The monetary policy has to be used to actives the growth
process and to create favourable conditions for economic
development.

TYPES OF
MONETARY
POLICY
INFLATION
TARGETING
PRICE LEVEL
TARGETING
MONETARY
AGGREGATES
FIXED
EXCHANGE
RATE
GOLD
STANDARD

INFLATION TARGETING:
Under this policy approach the target is to keep inflation,
under a particular definition such as Consumer Price Index, within
a desired range. The inflation target is achieved through periodic
adjustments to the Central Bank interest rate target.

PRICE LEVEL TARGETING:
Price level targeting is similar to inflation targeting except
that CPI growth in one year over or under the long term price
level target is offset in subsequent years such that a targeted
price-level is reached over time, e.g. five years, giving more
certainty about future price increases to consumers.


MONETARY AGGREGATES:
In the 1980s, several countries used an approach based on
a constant growth in the money supply. This approach was
refined to include different classes of money and credit (M0, M1)
etc. This approach is also sometimes called monetarism.

FIXED EXCHANGE RATE:
This policy is based on maintaining a fixed exchange rate
with a foreign currency. There are varying degrees of fixed
exchange rates, which can be ranked in relation to how rigid the
fixed exchange rate is with the anchor nation. (e.g. capital
controls, import/export licenses, etc.)

GOLD STANDARDS:
The gold standard is a system under which the price of the
national currency is measured in units of gold bars and is kept
constant by the government's promise to buy or sell gold at a
fixed price in terms of the base currency. The gold standard might
be regarded as a special case of "fixed exchange rate" policy, or
as a special type of commodity price level targeting.


MONEY SUPPLY
OPEN MARKET OPERATION
REPO RATE
STATUTIORY LIQUIDITY RATIO
INFLATION
CASH RESERVE RATIO
BANK RATE

ADVANTAGES & DISADVANTAGES OF
MONETARY POLICY
KEY INDICATORS
INDICATORS CURRENT RATE
INFLATION 4.25 %
BANK RATE 8.75 %
CASH RESERVE RATIO 4.00 %
STATUTORY LIQUIDITY RATIO
(SLR)
23 %
REPO RATE 7.75 %
REVERSE REPO RATE 6.75 %