The global financial crisis has proved that economic realities are very different from the traditional assumptions of macroeconomics. Macroeconomic Policies for Emerging and Developing Economies provides a contemporary analytical account and discusses the current debates on the theory and practices of macroeconomic policies of developing economies emerging from the crisis. It deals with issues relating to openness, capital flows and exchange rate policies as well as macro-financial policies. It underscores two important points: the need to design a development strategy that takes into account the economic context of the countries concerned, and for well-regulated macro-financial policies that would help promote the objects of sustainable growth with price and financial stability. This engaging and unrivalled guide to macroeconomic policy goes beyond the standard macroeconomists’ tool kit of monetary, fiscal and exchange rate policies and includes topics such as development strategies and macro-financial policies.
Chapter 4: Monetary Policy: The Black Box of Complexities
Monetary Policy: The Black Box of Complexities
The First Sip
Monetary policy is one of the most discussed areas of MEPs. The MIT Dictionary of Modern Economics edited by David Pearce states that it is
that branch of economic policy which attempts to achieve the broad objects of policy—stability of employment and prices, economic growth, and balance in external payments—through control of the monetary system and by operating on such monetary magnitudes as the supply of money, the level and structure of interest rates and other conditions affecting the availability of credit.1
This is a comprehensive definition. It is critical for a proper understanding of the roles that central bankers would have to play in the economic management of the country.