Central Banks & Monetary Policy Research Paper Example | Topics and Well Written Essays - 3250 words

Central Banks & Monetary Policy - Research Paper Example If compared to a case where objectives included both dimensions of public policy and commercial, such statement significantly increased the clearness of the direction given to bankers with central banks. There was an identity of logic of purpose. They were mandated with the role of discharging their functions in a way that is related to the interest of the public, considering state agencies’ functions and coordinating them. It is to the degree that the interest of the public could be provided by the addition of functions not assigned to the better (Callaghan, 2009). Hence, most central banks started to assume roles for financial sector’s development; payment system oversight and money operation, foreign exchange, capital market and debt oversight. From the present objective, such an interest objective exposes itself to understanding and provides directions on what is to be done when views or functions as to nation’s interest. It is only in the recent past that at tention has been awarded to objectives identification for function of individual and to objectives potential to conflict. Specifying objective trends have emerged, but functions of many banks are not directed by legal objectives. Objectives of Monetary Policy Price stability dominates the objective of monetary policy that is made specific in legislation. The stability of currency purchasing power is dominating legal objective. In most situations, it is always superior to other objectives. In contrary, if stability of price is not specific, the legally specified objectives tend to be general. In fact, if the stability of price is not stated specifically as a goal, then there is no objective that legally dominates, and instead definition of value of currency is used (Cecchetti, 2011). There are conflicts which arise if various actions of monetary policies are driven by various objectives. For instance, objectives that regard stability of price and variables of the real economy are con cerned with such conflicts. Secondly, is about rate of exchange regimes- local stability of price and stability in the exchange rate requires adjustment of interest rates in directly opposite positions. The conflicts raise interpretation issues of objectives that are legal where both currency and price stability are specific as objectives of monetary policy. If the stability in price would be equal to stability in currency, then conflict potential would be solved. Other ways of solving potential conflicts are; making sure that precedence orders are among objectives, recognition of lower levels to be in a position to clarify and interpret legislation’s higher level, use of extra-statutory agreement, which provide law interpretation on which the central bank agree, and lastly, taking into accountability the technical feasibility. Objectives Financial Stability Most of central banks presume that financial stability has policy responsibility. In a few situations where the central bank is faced with legal objective that is explicit for stability in finance, objective is of a wide range and the responsibility of central banks far reaching. However, in other situations where there are well set objectives for functions of financial stability, the language’s implication is an extent of results responsibility, with these banks charged with stable, safe or sound system of finance. Making a financial stability specific entails confrontation of issues discussed relating them to objectives of monetary policy. It is not an objective that is absolute- financial stability is always flexible. The extent is what varies. There is no

To what extent do you agree with free market economies being more Essay - 1

To what extent do you agree with free market economies being more effective than a mixed economy - Essay Example All individuals act on their behalf; however the actions are aimed at satisfying consumer needs. The free market economy is controlled by a price mechanism where the prices of goods and services are not determined by the government (Kates, 2011:34). They are determined by the interchange between the forces of demand and supply whereby price acts as an indicator for the suppliers to decrease or increase supply so as to reach an equilibrium between the forces of demand and supply and the best allocation of resources. Income and resources are distributed and allocated efficiently by using the price mechanism. A free market economy is an economic system that is not influenced by the government or other political forces (Kates, 2011:34). The rate of growth in such an economy relies on the level of consumer activity that is connected to the consumers’ purchases. This means that economic growth is possible in an economy that is not controlled by the government. Free market economies are closely linked with capitalism in the modern-day usage and popular culture. Cooperative members, market socialists and supporters of profit sharing support free markets. Why is a free market economy better than mixed economy? A free market economy is better than a mixed economy in various ways. ... Secondly, free market economies are flexible and therefore adjust freely to change. If there is a change in demand of a certain good or service in the market, companies can increase their production to meet the increased demand in the market. Conversely, in a mixed market economy, the government regulates the quantity that is produced and supplied in the market. There is increased competition among the major producers in the company. This mounts increasing pressure on the producers to improve their products and lower their prices so as to attract a higher number of consumers (Sirico, 2012:14). On the contrary, in a mixed economy a central authority such as the state or the government regulates the quality of goods and services. This means that the competition in the prices of goods and services is minimal hence consumers do not benefit in the long-run. In addition, increased competition among the producers encourages production using the latest technology (Kates, 2011:34). In other w ords, increased competition in the market leads to increased innovation that positively contributes to productivity. A free market economy encourages rational self-interest. People have more freedom to undertake actions that they want and to buy and sell what they want. Consumers have more freedom to produce and sell what they want with minimal government interference. However, in a mixed economy, the government sets the standards to be followed by the producers and consumers. Finally, the consumers determine the success or failure of a products or service in the organisation (Sirico, 2012:14). This means that the consumers have more power to drive the prices of goods and the quantity produced. On the other hand, in a mixed economy, a central planning