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role of monetary policy in economic development ppt



1. channels through which the instruments affect inflation and economic growth. The Economic Times defines monetary policy as "the macroeconomic policy laid down by the central bank," which manages interest rates, money supply, and functions as the demand side of economic policy to affect inflation, consumption, growth, and liquidity. development. Monetary Policy Issuing currency and setting interest rates is the function of government-operated central banks, such as the U.S. Federal Reserve, which are responsible for monetary policy. However, the scope of such a role may be limited by the concurrent pursuit of other primary objectives of monetary policy, the nature of monetary policy transmission mechanism, and by other factors, including the supply. Just like the industrialized countries, they face different constraints and therefore have different policies. It has been the pursuit of many nations in formal articulation of how money affects economic aggregates (Agu, 2010). The state fiscal policy is an integral part of overall economic policy, and is closely linked with the other economic policies. 2.1 - MONETARY POLICY IN LESS DEVELOPED ECONOMIES In LDCs, in the context of development, monetary policy has an active role and is considered quite relevant. Monetary: regulation of money supply by the Federal Reserve Board (“the Fed”) adjusting interest rates to increase or decrease inflation 3 Developmental Role: In a developing economy, the monetary policy can play a significant role in accelerating economic development by influencing the supply and uses of credit, controlling inflation, and maintaining balance of payment. Economic Policy 2 Fiscal vs. Monetary Policy 2 Types of policies Fiscal: taxing and spending considerations. role of monetary policy on the economic development and the changing in aggregate economic activity depend on how monetary policy is conducted and the independency of the central bank to choose the appropriate monetary tools to formulate the monetary policy of macroeconomic objectives (Alavinasab,2016). In fact, the development and implementation of fiscal policy must be cooperated with the financial policy, industrial policy and income distribution policy and other economic policy. The monetary policy tools are classified as direct and indirect or market –based tools. DRAFT v.4 UCLG Policy Paper The Role of Local Governments in Economic Development Prepared for United Cities and Local Governments by The Federation of Canadian Municipalities Fiscal policy is conducted by Congress and the President. Monetary Policy and its Effectiveness on Economic Development in Nigeria Author: Akinjare Victoria, A.A. Babajide, Isibor Areghan Akhanolu and Okafor tochukwu Subject: International Business Management Keywords: Monetary policy, growth, development, optiaml rate, foreign investment Created Date: 12/8/2016 10:18:13 AM Since the expositions of the role of monetary policy in influencing macroeconomic In a developing economy, the monetary policy can play a significant role in accelerating economic development by influencing the supply and uses of credit, controlling inflation, and maintaining balance of payment. Thus, monetary policy plays a stabilizing role in influencing economic growth through a number of channels.

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