What factors affect the effectiveness of monetary policy?

Monetary policy includes decisions taken by the government or central bank to try to influence the economy by affecting the availability of money and credit costs. There is a debate on the effectiveness of monetary policy and its basic restrictions. There are also practical problems that affect monetary policy efficiency, such as interaction with other currencies and the nature of the banking sector in the country in question.

There are three main areas of monetary policy. The first is to check the amount of money in circulation, whether it is literally printing money or more technical measures, such as quantitative release, which involves making money in the form of a loan. The second measure is to use interest rates to influence what people and businesses pay for a loan or acceptance for savings, which can affect their expenses and investment levels. The third measure attempts to influence the exchange rate between National and foreign currencies that may include the determination or reduction of exchange rates or purchase and sale of currency to affect the market rate. OThe belonging, such as government spending and taxation, falls into a separate category of fiscal policy.

The basic question of how effective monetary policy is compared with fiscal policy is one of the main debates in economics. Most economic views can be grossly divided into pro-fiscal control position defended by economists, such as John Maynard Keynes and pro-monetary control of the position of economist such as Milton Friedman. As a very gross simplification, monetarists believe that monetary policy is inherently effective and its role is to allow the markets to be as free as possible. Keynesiani believe that economic cycles can cause curtains on free markets, which means that fiscal policy is often required to "start" the economy. Such debates often have a political element based on people's view of the role of government in society.

Another inherent limit of the effectiveness of monetary policy is thatTwo of her main goals can be contradictory. Monetarists often try to maintain the level of inflation and both low and under control. The problem is that low interest rates mean that homeowners pay less for their mortgages and have more replacement cash, which can contribute to growing inflation.

There are also specific practical factors affecting the efficiency of monetary policy. How governments or banks can control exchange courses depend on economic and political arrangements. For example, individual countries that all use EUR have limited powers of monetary policy compared to their exchange rate. Meanwhile, trying to influence the exchange rate by purchasing or selling currency may depend on the financial power of the government or bank, along with other countries and even large individual and corporate trademen.

The effectiveness of interest rate control is also variable. In most capitalist economies on the free market or the central bank directly check the banks of interest suspaceB charged customers with banks. Instead, the government or the central bank determines that the Komerční banka rate is valid to borrow overnight to deal with changes in cashflow caused by the deposit and the level of the loan that changes from day to day. Theoretically, this rate is the main costs for Komerční banka and affects the rates that they must charge for loans to maintain profits. In practice, rates charged to customers can largely depend on how competitive the banking market is.