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Introduction to Monetary Policy

Author

Listed:
  • Glenn Hoggarth

Abstract

The key aim of monetary policy for most central banks is to keep inflation low and steady. However in a market-oriented economy, central banks cannot control inflation directly. They have to use instruments such as interest rates, the effects of which on the economy are uncertain. And they have to rely on incomplete information about the economy and its prospects. Some central banks use money growth or the exchange rate as intermediate targets to guide policy decisions. Others take a more eclectic approach and consider a range of factors. Monetary policy has occupied much time of the world’s most distinguished economists over the years. This Handbook provides an introductory overview to the subject. Following the introduction in Section 1, Section 2 describes the main costs of inflation. The next section provides an overview of the various routes by which monetary policy transmits through the economy. And Section 4 describes the alternative targets which central banks can use to guide policy. Some conclusions are provided in Section 5. The purpose of this Handbook is to assist monetary policy practitioners - those in central banks and governments who are advising and taking decisions on monetary policy. Those new to the subject may, it is hoped, find this a useful starting point for further reading and research. This handbook is also available in Russian and Spanish.

Suggested Citation

  • Glenn Hoggarth, 1996. "Introduction to Monetary Policy," Handbooks, Centre for Central Banking Studies, Bank of England, number 1.
  • Handle: RePEc:ccb:hbooks:1
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    Download full text from publisher

    File URL: http://www.bankofengland.co.uk/education/Documents/ccbs/handbooks/pdf/ccbshb01.pdf
    File Function: English version
    Download Restriction: no

    File URL: http://www.bankofengland.co.uk/education/Documents/ccbs/handbooks/pdf/ccbshb01_es.pdf
    File Function: Spanish version
    Download Restriction: no

    File URL: http://www.bankofengland.co.uk/education/Documents/ccbs/handbooks/pdf/ccbshb01_ru.pdf
    File Function: Russian version
    Download Restriction: no

    Citations

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    Cited by:

    1. William A Allen, 1999. "Inflation Targeting: The British Experience," Lectures, Centre for Central Banking Studies, Bank of England, number 1.
    2. Joe Ganley, 2004. "Surplus Liquidity: Implications for Central Banks," Lectures, Centre for Central Banking Studies, Bank of England, number 3.
    3. Tomasz Łyziak, 2001. "The premises and assumptions of monetary integration in Europe against the background of the theory of optimum currency area," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 3.
    4. Gokhan Yilmaz, 2002. "Open Market Operations In Turkey," Working Papers 0209, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    5. Rageh, Rania, 2010. "Interest rate rule for the conduct of monetary policy: analysis for Egypt (1997:2007)," MPRA Paper 26639, University Library of Munich, Germany.
    6. Mohamed Afzal Norat, 2008. "Forecasting banknotes," Handbooks, Centre for Central Banking Studies, Bank of England, edition 1, number 28.

    More about this item

    Keywords

    Monetary; Policy;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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