Paper Topic:
implementing monetary policy when short-term interest rates are close or at zero.
Name of Student Institution Name of Professor Date of Submission Implementing Monetary Policy When Short-Term Interest Rates Are Close or At Zero Executive Summary The implementation of monetary policy is among the main responsibilities of central banks . In order to do this , central banks apply the interest rates factor as much as possible . However , challenges start being posed at the point where the interest rates in the economy approach zero are actually get to zero . When this happens , there is no other way monetary policies can be effectively
implemented without the use of certain non-standard alternatives . Understanding the various alternatives available to central banks when interest rates are bound for zero are actually at zero is very important and so this paper critically examines the each of these possible alternative methods Traditionally , most of these policies are aimed at increasingly government expenditure on consumer goods in order to spur economic activities . Key among these approaches is the increasing the size of the balance sheet of the central bank . This is more specifically referred to as quantitative easing . The other approaches are manipulation of the composition of the balance sheet of the central bank shaping the expectations of the people for interest rates in the future and the sequencing of the perceived costs of low interest rates . The paper also explores the benefits and shortcomings of each method
Introduction
Implementation of monetary policy is a very important undertaking by any government . Monetary policy is essentially the engine that drives virtually all...
Not the Essay You're looking for? Get a custom essay (only for $12.99)
