Monetary policies

Central banks are responsible for creating, implementing and governing monetary policy in a country. While some of these mandates and goals are shared by the different central banks, there are goals that are unique. Ultimately, monetary policy boils down to promoting and maintaining price stability and economic growth.

The distinction between the various types of monetary policy lies primarily with the set of instruments and target variables that are used by the monetary authority to achieve their goals.

Goals

- Price Stability
- High Employment
- Economic Growth
- Interest Rate Stability
- Financial Market Stability
- Foreign Exchange Market Stability

Monetary Policy Target Market Variable Long Term Objective
Inflation Targeting Interest rate on overnight debt A given rate of change in the CPI
Price Level Targeting Interest rate on overnight debt A specific CPI number
Monetary Aggregates The growth in money supply A given rate of change in the CPI
Fixed Exchange Rate The spot price of the currency The spot price of the currency
Gold Standard The spot price of gold Low inflation as measured by the gold price
Mixed Policy Usually interest rates Usually unemployment + CPI change


Policy of various Nations

Australia - Inflation targeting

Brazil - Inflation targeting

Canada - Inflation targeting

Chile - Inflation targeting

China - Monetary targeting and targets a currency basket

Czech Republic - Inflation targeting

Colombia - Inflation targeting

Eurozone - Inflation targeting

Hong Kong - Currency board (fixed to US dollar)

India - Multiple indicator approach

New Zealand - Inflation targeting

Norway - Inflation targeting

Singapore - Exchange rate targeting

South Africa - Inflation targeting

Switzerland - Inflation targeting

Turkey - Inflation targeting

United Kingdom - Inflation targeting, secondary targets on "output and employment". In general the US attempts to maintain a steady inflation of between 2% to 3%.

United States - Mixed policy

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