Monetary policy and Money: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Add links.)
 
imported>Doug Williamson
m (Layout.)
 
Line 1: Line 1:
Monetary policy is central government or other policy to stimulate or otherwise influence economic activity by influencing money supply or interest rates.  
Historically, and narrowly, money referred to cash (notes and coins) in official currency backed by the relevant government.  


Historically, mechanisms for influencing the money supply have included the use of open market operations, quantitative easing, the central bank discount rate and reserve requirements.
Such money may be legal tender.




====UK monetary policy====
More generally, money is anything accepted for the settlement of debts in an economy or jurisdiction.


In recent years the primary objectives of UK monetary policy have been 'stable prices' and confidence in the currency, collectively known as 'monetary stability'.


'Stable prices' are defined by the UK government's inflation target, currently 2% per annum as measured by the UK Consumer Prices Index (CPI).
To the economist, money is whatever is used for four roles:
# Medium of exchange.
# Unit of account.
# Store of value.
# Standard for deferred payment.


The objective is to keep inflation close to the target, neither too high nor too low. If inflation moves away from the target by more than 1% in either direction, additional corrective actions will be taken.


''Fiat money.''


Subject to the primacy of the inflation target, the secondary objectives of monetary policy in the UK are to support the government's other economic objectives, including those for growth and employment.
Money, then, can be many things, but most often today is ''fiat'' (let it be) money, i.e. tokens provided by a government and accepted by them for payment of taxes, or abstract representations of it. The latter are mostly as electronic representations in the accounts of banks and other monetary financial institutions, including [[central bank]]s. Most money in developed countries consists of these records rather than of the tokens issued as fiat money.




Responsibility for setting UK monetary policy - to achieve monetary stability - lies with the Bank of England's Monetary Policy Committee (MPC).
''Commodity money.''


In the past money has been commodity money, for example gold or silver or valuable spices or shells, the value of which is in the valuable material or object rather than a nominal value ascribed to (a portion of) it. A government can issue tokens (e.g. notes or coins) exchangeable for a fixed quantity of such a commodity. Such tokens are known as representative money.


Monetary policy in the UK has usually operated through setting the Bank of England's interest rate, the Official Bank Rate, or 'Bank Rate'.


The Official Bank Rate is sometimes referred to as the 'Bank of England Base Rate'.
== See also ==
 
* [[Broad money]]
 
* [[Cash]]
====Quantitative easing in the UK ====
* [[Central bank money]]
 
* [[Commodity]]
In 2009, in addition to setting Official Bank Rate, the MPC started quantitative easing (QE).
* [[Cryptocurrency]]
* [[Currency]]
* [[e-money]]
* [[Fiat currency]]
* [[Finance ]]
* [[Financial stability]]
* [[Fungible]]
* [[Gold standard]]
* [[Legal tender]]
* [[Monetary]]
* [[Monetisation]]
* [[Narrow money]]
* [[Token]]


This means injecting money directly into the economy by purchasing financial assets.


QE is designed to stimulate the economy further, beyond what could be achieved by low interest rates alone.
=== Other links ===
[http://bankunderground.co.uk/2015/08/21/monies-joining-economic-and-legal-perspectives/ Bank Underground blog: Monies - Joining economic and legal perspectives]


 
[[Category:Accounting,_tax_and_regulation]]
== See also ==
[[Category:The_business_context]]
* [[Bank of England]]
[[Category:Financial_products_and_markets]]
* [[Bank Rate]]
* [[Consumer Prices Index]]
* [[Deflation]]
* [[Discount rate]]
* [[Dovish]]
* [[Financial Policy Committee]]
* [[Financial stability]]
* [[Fiscal policy]]
* [[Hawkish]]
* [[Inflation]]
* [[Interest rate]]
* [[Keynesianism]]
* [[Lowflation]]
* [[Monetary]]
* [[Monetary Policy Committee]]
* [[Money supply]]
* [[Official Bank Rate]]
* [[Open market operations]]
* [[Quantitative easing ]]
* [[Reserve requirements]]
* [[Sterling Monetary Framework]]
* [[Supply side policy]]
* [[ZLB problem]]

Revision as of 15:56, 17 March 2021

Historically, and narrowly, money referred to cash (notes and coins) in official currency backed by the relevant government.

Such money may be legal tender.


More generally, money is anything accepted for the settlement of debts in an economy or jurisdiction.


To the economist, money is whatever is used for four roles:

  1. Medium of exchange.
  2. Unit of account.
  3. Store of value.
  4. Standard for deferred payment.


Fiat money.

Money, then, can be many things, but most often today is fiat (let it be) money, i.e. tokens provided by a government and accepted by them for payment of taxes, or abstract representations of it. The latter are mostly as electronic representations in the accounts of banks and other monetary financial institutions, including central banks. Most money in developed countries consists of these records rather than of the tokens issued as fiat money.


Commodity money.

In the past money has been commodity money, for example gold or silver or valuable spices or shells, the value of which is in the valuable material or object rather than a nominal value ascribed to (a portion of) it. A government can issue tokens (e.g. notes or coins) exchangeable for a fixed quantity of such a commodity. Such tokens are known as representative money.


See also


Other links

Bank Underground blog: Monies - Joining economic and legal perspectives

Retrieved from ‘https://wiki.treasurers.org/w/index.php?title=Monetary_policy&oldid=32914’