WHAT IS THE TARGET OF THE MONETARY POLICY?
Oct 6, 2007: Target of the monetary policy varies from country to country. Some of the targets are as follows: • Inflation targeting • Monetary aggregate • Fixed exchange rate • Mixed policy Inflation targeting Central Bank set the monetary policy in such a way so that inflation rate stays at a targeted level. Most of the modern economies of today are following inflation targeting policy. Monetary aggregates Under this target, monetary growth (M1, M2 or M3) would occur at a constant rate. This policy is pursued in 1980s. This aspect of monetary policy is called monetarism. Fixed Exchange rate Central Bank sale and buy the foreign currency daily basis to maintain a fixed exchange rate. Mixed Policy Multiple targets are inflation, employment, growth etc. If multiple targets are taken, it is difficult to achieve all the goals at a time. We can not get all at a time.
