Monetary policy Research Paper Example | Topics and Well Written Essays - 1750 words

financial policy - Research Paper ExampleIt lays a vital role in opening up the monetary market of a country. It also has supervisory powers, aimed at limiting banks and financial intermediaries from reckless behaviour. In developed nations Central banks are independent so that they operate under rules make to help them operate in a political free management (Kurgan and Wells 387). Therefore, this paper aims at obtaining a deep analysis on the role of central bank in use and implementation of monetary policy to stabilize the scrimping. This will be with respect to the great falling off of 1929 to early 1940s. Monetary policy is the mean through which the monetary tools of a country chequer the f pocket-size of money. It mostly focuses on the rate of interest with an aim of promoting economic egression and stability. It is key role is to sustain, stable prices and maintain low levels of unemployment. Monetary policy can either be expansionary of contractionary. Expansionary pol icies increase the supply of money in the economy while the contractionary measurers reduce the total money supply to the economy (Bofinger, Reischle and Schachter 123). Expansionary policy is theoretically used to control unemployment in a ceding back by lowering interest rates in the great deal that light-headed credit will motivate businesses into expanding. Contractionary policy is intended to slow inflation in a view of curbing the resulting deterioration and distortions of as located values. The Monetary policies advocated by the central bank helps in fostering the growth of financial market by encouraging open market operations. It is the most used tool by the central bank of each country to correct any economic disorder or to set the pace of a country economic growth (Bofinger, Reischle and Schachter 170). Economic depression is an economic slowing where the arrant(a) domestic product is expected to decline at around 10%. To give rise to agnise economic depression, the gross domestic product was believed to have declined by at least 33% per annum. This is the finish off in history so far. Economic depression is characterized by reduced consumption by individuals and the government, increase liquidation of the banking system or narrowing of financial market to the extent that it cannot allocate capital inflow to various sectors of the economy, high levels of unemployment expressed in two digits, insolvency of economic driving companies, a reduction in the wage rate for example, during the great economic depression it reduced sixty percent and acute famine of money supply in the economy. Thus, depression can be defined as a recession that lasts longer and has a massive decline in business activity thus a slowdown in economic growth (Bofinger, Reischle and Schachter 213). Central bank and monetary policy with respect to the great depression of 1929 to early 1940s can be analyzed from different views. The great depression lasted for 10 years. This occurred when the shares traded in a day tripled followed by a drastic fall in price by astir(predicate) 24%. The great economic depression was characterized by an increased rate in unemployment which increased by 22% of the total country workforce. The total gross domestic product reduced by fractional as the price fell by 10%. The depression also caused farmers to lose their farms, and this made them in concert with the unemployed to move to urban areas in search of daily earnings, this lead to development of shanties thus mankind more problems. There were massive bank failures and