Monetary Policy: Macro Economic Policy Final Goals
Monetary Policy: Macro Economic Policy Final Goals
Monetary Policy: Macro Economic Policy Final Goals
Monetary Policy
Fiscal Policy
Other Policy
Central Bank Strategy:
Use of Targets
Definition:
“the buying and selling of government securities
in the open market (by central bank) in order to
change the quantity of money”
Instruments of OMO:
USA : T-Bills, central bank bills, prime
commercial paper
INA : SBI, SUN, FASBI (rupiah intervention),
SWBI (Sertifikat Wadiah BI), Forex intervention
When the Central Bank purchase or sells securities on the
open market, the economy is affected in three direct ways:
i↑
Jual Surat M0 ↓
Berharga
M1&M2 ↓
Harga
OPT (Inflasi)
i↓
Beli Surat M0 ↑
Berharga
M1&M2 ↑
Mengapa OPT banyak diterapkan di
banyak negara (Indonesia)?
(Gray, et all, 1995)
Dewan
Gubernur
Bank
Dir. Pengelolaan
Deputi Gub. Moneter
Bidang Target indikatif &
Pengelolaan
Moneter Hasil lelang
Biding lelang
∆M= m x ∆BR
A reduction in the discount rate would
cause an increase in borrowed reserve,
which would cause a multiple positive effect
on the quantity of money
An increase in the discount rate would
cause an decrease in borrowed reserve,
which would cause a multiple negative
effect on the quantity of money
Discount window policy and total bank credit
∆L= mL x ∆BR
A reduction in the discount rate would
cause an increase in borrowed reserve,
which would cause a multiple positive effect
on the total credit
An increase in the discount rate would
cause an decrease in borrowed reserve,
which would cause a multiple negative
effect on the total credit
Discount rate policy reconsidered
∆L= ∆mL x MB
Advantage:
Affect all the bank equally and have powerful
effect on the money supply
Disadvantage;
Is not practical strategy costly
Raising the requirement can cause
immediate liquidity problem
The policy tool do not have much to
recommend it, and it is rarely used
Other Miscellaneous Means of Conducting
Monetary Policy
4. Moral Suasion:
5. Selective Control:
Margin Requirement
Credit Controls