Monetary policy implementation, QE and the transmission mechanism
Introduction
The goals of central banks around the world are similar and price stability is the main
goal of central banks, but they also frequently have important goals like low
unemployment and steady economic growth.
Central banks can use a variety of monetary policy tools, including interest rates,
quantitative easing or tightening, reserve requirements, and interest on reserves, to
achieve their objectives. Even if the money neutrality principle is upheld, the effects
of monetary policy on the economy might not be immediately apparent. However,
central bankers appear to believe that, at least in the short term, monetary policy can
affect the economy and not just the levels of inflation.
The various reasons why the banking sector needs cash reserves and the
mechanism which the SARB can use to manipulate the quantity of cash
reserves held by the banks.
Introduction
The goals of central banks around the world are similar and price stability is the main
goal of central banks, but they also frequently have important goals like low
unemployment and steady economic growth.
Central banks can use a variety of monetary policy tools, including interest rates,
quantitative easing or tightening, reserve requirements, and interest on reserves, to
achieve their objectives. Even if the money neutrality principle is upheld, the effects
of monetary policy on the economy might not be immediately apparent. However,
central bankers appear to believe that, at least in the short term, monetary policy can
affect the economy and not just the levels of inflation.
The various reasons why the banking sector needs cash reserves and the
mechanism which the SARB can use to manipulate the quantity of cash
reserves held by the banks.
