Monetary policy one calls in summary all politico-economic measures, which the central bank seizes, in order to carry out their goals. In the EWU the monetary policy is noticed by the European central bank. In the closer sense one calls a shortage of the money supply kontraktive/restrictive monetary policy and an expansion of the money supply than expansive monetary policy.

With the goals, which the monetary policy pursues, one must differentiate between two main:

• A politico-economic goal: Usually results from the central bank statutes. At the German Federal Bank as also with the European central bank that is price level stability. The central bank of the USA (the Federal reserve system (Fed)) beside it a growth and an occupation goal has. In addition, Federal Bank and EZB have the secondary objective to support the general economic policy. Sometimes central banks pursue also rate of exchange goals.

• A goal of the central bank politics: Results from the intermediate objective, which it has with the fulfilment of its politico-economic goal in the eye. The intermediate objective fulfills thus the role of an indicator whether the politico-economic goal is kept. This can e.g. be the money supply, the interest, the inflation rate, the economic growth or a combination of several goals.

Politico-economic goals of the monetary policy

Theoretical bases

The role of the money in the restaurant economics and concomitantly the meaning of the monetary policy were disputed in the course of the time between the economical Lehrmeinungen and are it still.

The classical authors usually subordinated neutrality of the money, i.e. they saw an important transaction medium in money, assumed however money serves only as "“lubricant"”, but has no reactions to the material economy. In other words: Whether and how much is produced, independently of the price level is decided.

The Keynesianismus recognizes material-economical consequences of the supply of money on, grants to the monetary policy however only a supporting function. Since an expansion of the money supply in a recession cannot stimulate the demand, because the economy is in the case of liquidity, only indirect effects result over the interest, which is with Keynes an important determinant of the investment activity. To that extent the Keynesianismus endorses a monetary policy in the sense of an interest policy.

For the Monetaristen however the monetary policy plays a central role. Since they assume a policy, which does without short term interventions is to be preferred and itself instead for foreseeable, constant conditions for the economy expresses, places it price level stability into the center of their politics. In order to ensure these, they recommend a rule-bound monetary policy, which is aligned to a constant expansion of the money supply.

Price level stability is regarded because of the negative effects of the inflation on the capital formation and growth as the most important goal of the monetary policy. Since inflation financial resources favours cancelled and debtors, the restaurant subjects are not ready with high inflation to save. Therefore no available capital is available with inflation for investments; sufficient special capital is not formed and thus growth is obstructed. In addition a high inflation rate covers the signals, which proceed from prices on the market happening: If a product becomes more expensive, then it is unclear whether this is only one consequence of the general inflation or whether this product becomes more expensive, because the demand for it rises, so that enterprises should turn to the production of this property.

Goals in practice

On the basis of different theoretical positions can one to conclude that in countries, in which a rather keynesianische policy is pursued the issuing bank predominantly pursues growth and occupation goals, while in countries with monetaristischer adjustment of the economic policy rather price level stability is located in the center. The distinction is however not simple. Thus also historical experiences play an important role during the derivative of goals. In Germany price level stability was always an important goal, independent of the general adjustment of the economic policy after two hyperinflations.

Criticism

The general allocation of the monetary policy to the goal of price level stability (e.g. in the uneasy square) is a little disputed. There are however controversies over it, which inflation rate of a national economy is beneficial and becomes harmful starting from when inflation. There are internationally comparing investigations, which arrive at the result that only relatively high inflation rates (over 10%) really obstruct growth. To that extent one can argue about whether for example the goal of the EZB is appropriate of aiming at an inflation rate in the euro-area of 2% or whether an inflation rate of 3% would not be to be justified or somewhat over it.

Generally it is recognized today that because of the danger of gliding into the deflation the optimum does not lie by any means with an inflation rate of zero. Above all a lowering of the inflation rate (Disinflationierung) is also connected with economical costs, e.g. with a loss at economic growth.

In this connection it is criticized that the monetary policy succeeded to go back in the 80's the inflation rates that this happened however at the price of an injury of the golden rule of the accumulation, i.e., the interest rates, at least the long-term, were continuously more highly than the economic growth rates. Before at times of the Keynesianismus however the interest rates, based on this rule, had been continuously too low. The short term interest rates affected directly by the monetary policy fit for the 80's better the economic growth, the long-term are however measured at the rule continuously too high (see illustrations).

The dosage of the money supply is made more difficult to strongholds (accumulation) or moving away large quantities of cash by. For example it is abroad partly used beside the there national currency than spare currencies, about in former times in Balkans countries the German Marks. Central banks state again and again that large Notenwerte in a number inland superproportional in the comparison to the practical use are required and spent by them. If this money is again supplied to the market to large extent or led back into the own currency area, then the active money supply increases and can lead to inflation.

Little attention in science and in the policy finds only quite to today the problem of the process (more exact: the form) of the cash flow in a currency community to say (in order not national economy). This applies in particular in the view to how differently the market participants participate at the cash flow. To the elucidation: It uses few to a national economy for its Binnenkonjunktur (in the under and central layer), if it has altogether a large money supply, but the majority of it only by the hands of fewer market participants (in the upper Oberschicht) goes. The creation of money connected with credit systems fills up the lower layers regularly with money. The market conditions let this money however constantly rise into the Oberschicht. Beginnings of this criticism are treated recently under the term Nile politics.

Articles in category "Monetary policy"

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