Purpose of Economic Policy
Economic policy is the set of all measures that can be taken to pursue the following objectives: •
economic development;
• full employment;
• Containment of inflation;
• balance and exchange rate
• containment of budget deficits.
E 'entrusted to the European Central Bank, which as Summit of the ESCB (European System of Central Banks) has the task of defining the economic policy of the Euro
The ECB and the ESCB (Holders of monetary policy)
The ECB, based in Frankfurt, acquires legal personality in 1999 and is placed at the head of the ESCB, the body responsible for setting economic policy throughout the Euro area.
The ECB consists of three organs:
• Steering Committee, consisting of all the governors of national central banks of countries in the Euro, which has the task of formulating a common monetary policy in all Member States ;
• the Executive Council, consisting of six members chosen from leading experts, whose task is to ensure that it is actual implementation date in the various States of the Euro to the provisions concerning the economic and monetary policy are taken at central level;
• the General Council, an advisory capacity.
monetary policy as an instrument of economic policy
Monetary policy, which consists in the expansion or reduction of the so-called monetary base, comprising the sum of bank money, reserves Legal deposited by banks at the Bank of Italy and unused credits granted by the Bank of Italy to the various banks. The expansionary policy
the monetary base is made with the aim of increasing the amount of money in circulation and thus the volume of trade and investment. In contrast, restrictive monetary policy is implemented to reduce the amount of money in circulation in order to curb inflationary pressure.
World markets were in these days face a credit crisis. The banks in this context do not trust each other the Euribor reaches the highest level in 15 years (1994). Central banks in an attempt to overcome this crisis has injected liquidity on the market by reducing interest rates.
Today the bank is using more willingly to the central bank to meet its liquidity requirements, rather than resort to the interbank system. In the last cut rates (monetary expansion), there was an operation coordinated a worldwide have occurred and that the ECB, BoE, the Bank of Japan, Swiss National Bank, the Bank of Canada, in addition to central banks Norway, Sweden, Denmark and Australia.
Over the past period has witnessed continuous liquidity in the market only in the last few weeks has been boarding for about a possible cash injection of € 500 billion over the approval of the bailout plan and common purpose in Europe. Moreover
in situations of this kind of prestigious banks failures to illiquidity crisis but also dictates a rapid reduction of consumption rates. The phenomenon, however, clearly also affects the demand for money increases mainly due to the mistrust that has been generated on the system.
Today the bank is using more willingly to the central bank to meet its liquidity requirements, rather than resort to the interbank system. In the last cut rates (monetary expansion), there was an operation coordinated a worldwide have occurred and that the ECB, BoE, the Bank of Japan, Swiss National Bank, the Bank of Canada, in addition to central banks Norway, Sweden, Denmark and Australia.
Over the past period has witnessed continuous liquidity in the market only in the last few weeks has been boarding for about a possible cash injection of € 500 billion over the approval of the bailout plan and common purpose in Europe. Moreover
in situations of this kind of prestigious banks failures to illiquidity crisis but also dictates a rapid reduction of consumption rates. The phenomenon, however, clearly also affects the demand for money increases mainly due to the mistrust that has been generated on the system.
rate cut or liquidity have the same result. The two operations even though similar results, produce different results in terms of rapidity with which they reach the economic system.
AS THE CENTRAL BANK TO liquidity '?
the Central Bank are given tasks of primary importance as the issue of currency, the implementation of monetary policy moves and the issue of government securities as well as the management of gold reserves of the state.
The Central Bank has the power to maneuver on monetary policy, which may be to expand the base moneraria (epsansiva) and to reduce it.
Through various means the central bank of a country (eg the Bank of England or that of Japan) or a similar aggregate political unity that would lead an economic policy (for example, the European Central Bank) can be adjusted in various ways cost of money and make sure that the cash This market is adequate to the needs of the ordinary course of trade. Recall that poor liquidity creates the phenomena we see today, while excess liquidity instead influences the growth of prices by the consumer.
The monetary policy moves are distinguished in two main groups:
The monetary policy moves are distinguished in two main groups:
1) open market operations
2) operations facilities (standing facilietes)
OPEN MARKET OPERATIONS
a) refinancing;
b) longer-term
c) fine-tuning;
d) structural type.
c) fine-tuning;
d) structural type.
OPERATIONS FACILITIES
Monetary Policy (wikipedia)
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