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Effectiveness of Monetary Policy for the UK - Essay Example

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By monetary policy, we mean those measures which are adopted by the central bank to increase or decrease the supply of money in circulation. It means that the policy of the central bank is known as monetary policy. The direction and speed with which changes in the rate of interest affects demand will be a key determinant on the success of monetary policy…
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Effectiveness of Monetary Policy for the UK
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Download file to see previous pages It therefore concerns the relationship between total supply of money and interest rates in a given economy. According to Julio, (2004) the main objectives of monetary policy are as follows:
It creates more employment opportunities since the central bank can encourage the commercial banks to provide more loans to the sectors which will in return employ more people this reducing unemployment.
Eurozone came into existence in 1998 after a meeting of eleven European Union members who agreed on the convergence principles. This was followed by the official launch of the euro as a common currency in 1st of January 1999. currently the Eurozone has over three hundred and eight million people and twelve member states which includes Spain, Portugal, Netherlands, Luxembourg, Italy, Ireland, Greece, Germany, France ( with the exception of pacific territories which uses CFP franc), Finland, Belgium and Austria. (ECB, 2001)
Being a subset of the member states of the European Union Eurozone has adopted the euro as a common currency thus resulting in the currency union amongst the member states. The European Central Bank (ECB) carries the responsibility of monetary policy within this territory .With the monetary policy that is used by the Euro zone being the inflation targeting.
The European Monetary Union (EMU) is very much operational with the UK being ambivalent on whether to join or not. By it being an economic and political issue monetary union has generated divergent views from the professional economists, business opinion and the general public opinion as to whether it would be important for UK to join. It is clear that presently European economic union is not a popular option in the UK. (Angeloni and Mojon, 2003)
The Surveys conducted by the British Social Attitudes has regularly indicated that less than a fifth of individuals who have polled since 1993 would buy the idea of replacing the pound with euro a result that has been confirmed in the 1999 release. (Tommaso, 2004)
However, it has been argued that most of this public opinion could be influenced in a favourable manner by the It has also been argued that public opinion could be favourably influenced by the pro-EMU business opinion revelations.
This paper will look at the economic issue although it will still touch on the political issues emanating from joining ...Download file to see next pagesRead More
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