Instruments of Monetary Policy
The monetary policy is aimed atthe implementation of activities undertaken by the government in the sphere of monetary and credit relations with a view to regulating economic processes. Its coordinator is the central bank. The policy itself is carried out in two stages. The first stage - the central bank affects the parameters of the monetary sphere. The second stage - the corrected parameters are transferred to the production sphere. The result of effective implementation of these steps will be the sustainability of economic growth rates, a relatively low unemployment rate, stability of the price level and a characteristic balance of the state balance. The priority in achieving improvement in the economic state of any state is the stability of the price level.
The main instruments of monetary policyshould influence all financial processes in the state as either direct (or administrative), or indirect (or economic) levers. This should be manifested in the state control of such a basic financial indicator as the country's balance of payments.
Administrative Instruments of Monetarypolicies have the form of prescriptions, directives and instructions that must come from the Central Bank and regulate limits on both interest rates and the issuance of loans. Control over the interest rate limit is carried out by determining the limit value of loan interest, as well as the deposit interest rate and the rate on savings deposits.
Limitation of the volume of operations on loansprovides for an establishment of the upper limit value of credit emission. This concept is known and under this name - "credit ceiling". In other words, the total amount of loans that is provided by the banking sector determines this credit ceiling. The same restrictions on the volume and rate of growth of loans are established for all commercial banks. Sometimes the credit limit is set only for certain sectors of the economy and is called selective credit control. This method of regulation includes limiting limits on the accounting of bills and limiting the credit for consumption.
Direct instruments of monetary policyare quite effective during the crisis of the credit system, as well as under the underdeveloped domestic financial market. Their main drawback is facilitating the outflow of funds into the "shadow" and abroad.
Indirect instruments of monetary policy include: changes in the discount rate, the setting of mandatory reserve volumes, as well as open market operations.
One of the first methods involved inregulation of monetary relations, it is considered to be a change in the discount rate. Its essence is to influence the central bank on the liquidity of other banks and the overall monetary base. At the same time, under liquidity, it is necessary to understand the ability of banks of different forms of ownership to fulfill all of their financial obligations in a timely manner.
The main instruments of monetary policy,allowing to control bank liquidity, include and definition of the amount of required reserves. These reserves are necessary to guarantee the payment of deposits to customers in the event of a bankruptcy of the bank. The central bank establishes a certain number of standards for mandatory reserves. For example, to increase the population's savings, the central bank sets lower rates for deposits with a short deposit period and higher rates for demand deposits.
The described indirect monetary instrumentspoliticians have a significant impact on the scale and structure of lending operations. Their advantage is effective influence on the object of regulation, absence of occurrence under their influence of disproportions in economic processes.
Proceeding from the above, it can be concluded that all instruments of monetary policy should serve as levers of economic impact for achieving a positive macroeconomic effect.