ADVANTAGES

This fact makes a strong case for giving primary responsibility for control over inflation to the central bank. However, since the public needs to understand the basis for monetary policy decisions, it is best in specifying the goals of monetary policy to recognize that monetary policy does affect output. The approach taken in the statutes of the new European Central Bank is to specify preservation of the value of the currency as the primary goal of the central bank, with the promotion of full employment and growth being permitted to the extent that this does not conflict with the goal of price stability. Alternatively, the primary goal could be set as the preservation of the value of the currency, taking account of the impact of monetary policy decisions on economic activity. The central bank could also be assigned the task of promoting growth—but it has to be understood that this is best done by maintaining a low rate of inflation and ensuring the health of the financial system.

Testimonials

Satisfied customers are saying