Monetary authority controls the expenditure of economic units

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Monetary authority controls the expenditure of economic units

Post  Admin on Sat Sep 23, 2017 8:39 pm

24/9/2017 12:00 am

By controlling the interest rate
Baghdad / Emad Al-Amara
Monetary policy adopts a goal or set of objectives that have a clear impact on the structure of the economy, which makes it an essential part of economic policy. Monetary policy has played an active role in managing the currency and stabilizing the monetary sector in most of the world economies, including Iraq. Control of the imbalances that affect the economy, notably inflation.

Economist Dr. Qusay al-Jabri told Al-Sabah that monetary policy aims at achieving a high level of use. The monetary authority is keen to stabilize economic activity at the highest possible level of employment for human and natural resources. The monetary authority must take all measures to reduce unemployment levels, Accompanied by contractionary factors in output, through an expansionary monetary policy that increases investment rates.

The monetary policy is working to mitigate the violent changes in the level of prices with the attendant fluctuations in the value of money, and the resulting harmful effects in the level of distribution of incomes and wealth and the allocation of economic resources, and the goal of price stability is one of the priorities of the monetary authority.

Output growth
Al-Jabri said that preserving the value and volume of trading in the economy and maintaining the balance of monetary values ​​with the real values ​​related to the growth of output is the work of the monetary policy in Iraq and the intervention of monetary authority by controlling the interest rate and bank credit in controlling the spending of economic units, The safety of the currency value of the arbitrariness caused by the balance of payments deficit.

 Size of assets
Al-Jabri said that when a deficit in the balance of payments increases monetary policy, the interest rate leads to a decrease in the credit of economic units, and then the liquidity, which makes them regain the heads of their employees abroad and the flow of foreign capital to the home following the rise in the domestic interest rate, Foreign assets and improved balance of payments and vice versa occurs in the case of surplus, and seeks monetary authority to affect the investment environment and recovery and then a continuous and appropriate increase in real GDP or real per capita income, through the impact of investment across Changing the interest rate leading to growth rates in the output and then narrowing the gap.
He pointed to the monetary policy to a number of obstacles in its path, including the conflict between the objectives, where the monetary policy suffers from the inability to achieve two goals or more in one, for example, stabilization of prices often collide with the stabilization of interest rates and access to the rate High usage.
 He stressed that the reduction of inflation requires a monetary policy of deflation, working to raise interest rates, which causes the reduction of investment and use, and there is a slowdown in monetary policy, which requires a period of time to choose and start implementation and achieve results, and the procedures are not commensurate with the situation and the goals that came to achieve.

Credit Flow
The state of financial panic is the situation that could undermine the monetary policy of its target if it occurs, the monetary authority should change its strategy in case of financial panic to ensure the integrity of the banking system and the flow of credit properly.
 Dr. Jabri pointed out that in a recessionary policy, if financial panic occurs for reasons that may not be monetary, but for real reasons or individuals' expectations, this would impede monetary policy. The monetary authority should adopt an expansionary policy to avoid aggravation of this situation.
Al-Jabri explained that when the monetary authority follows a deflationary policy by raising the interest rate significantly, this action will cause instability in the business environment, money markets and investment portfolios of individuals. This will generate a wave of anger among the traders in the economy. .


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