Monetary policy

Published on August 29, 2021 Reviewed on August 29, 2024   18 min
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Hi. My name is Mariano Torras. I'm professor of Economics at Adelphi University in New York. We're going to be doing a lecture series on macroeconomics. A nation's monetary policy
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concerns the supply of money in the economy and interest rates for myriad types of borrowing. As with fiscal policy, the fundamental goals of monetary policy are price stability, high employment and economic growth. Critics however often state that price stability has become too high a priority in relation to the other goals. Monetary policy is conducted by a nation's Central Bank.
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Every country has its own Central Bank, but the European Union in addition has its own known as the European Central Bank. The United State's Central Bank is known as a Federal Reserve and Japan's as the Bank of Japan.
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It was in the 19th century that most of the world's leading countries established Central Banks, even if predecessors to Central Banks had been established centuries earlier in countries like Holland, Sweden, and England. Central Banks were given a monopoly over the creation of money, and in those days the bank notes or currency of most countries was backed by their equivalent value in gold and/or silver. This helped lend stability to the monetary system as faith in the value of paper and coin currency became more widespread. Central Banks each have their own subsidiaries in different regions of the country that help decentralize, hence expedite many of its main functions. The board of governors of a Central Bank oversee

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