Sistemas Tema 2

Classified in Economy

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Monetary Policy:The process by which monetary policy decisions affect the Economy and the price level,is called the transmission Mechanism that consists of a long chain of causes and Effects that relates monetary policy decisions to the level of price.
The impact mechanism of the last chains of effects is: • The Lower interest rates favor, consumption as they will be Compatible with lower returns of savings, and on the other hand, investments Since then the cost of borrowing is lower  they could easily exceed the realized investment costs. •Consumption and investment are  affected by movements in asset prices via Wealth effects and effects on the value of collateral.
In summary, the goal of the monetary policy is to achieve price stability In the euro area. In order to achieve this, decisions on the so-called operative Variable are taken.“Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%. Price Stability is to be maintained over the medium term.
The main strategy of the ECB in achieving its objective revolves around the Thorough analysis of the risks to price stability. This analysis is organized Around two analytical (but complementary) perspectives, referred to as the "two Pillars": economic analysis and monetary analysis. 
Economic analysis  consists of the three elements: 1. Real activity and financial conditions: The economic analysis assesses the Short to medium-term determinants of price developments. The focus is on real Activity and financial conditions in the economy.2. Asset prices : These variable is  analysed to derive information about the Expectations of the financial market.3. Macroeconomic projections are produced under the responsibility of ECB staff using a number of analytical and empirical Models.
Monetary analysis takes a longer-term perspective and focuses on a longer-term horizon than the economic analysis. It exploits the long-run link between money and prices.
2.2. MONETARY POLICY OPERATIONS OF THE ECB The EMU implies a single Monetary policy for all its member countries, which means that there is an Entity – the (ECB) and the European System of Central Banks (ESCB) – that has the exclusive capacity to decide on the regulation Of the amount money and its other aspects within the whole euro area
 the operational framework follows several guiding principles:-
Operational efficiency: It can be defined as the capacity of the operational framework to Enable monetary policy decisions.-. Equal treatment and Harmonization-Decentralised implementation-. Simplicity, transparency,  safety and cost efficiency.
Open Mark Operat:Play an important role in Steering interest rates, managing the liquidity situation in the market and Signalling the monetary policy stance. They constitute the fundamental element Of the actions of the ESCB and the interest rates defined therein are the key reference for monetary policy: (MROs) are Regular liquidity-providing reverse transactions conducted by the Eurosystem With a frequency and maturity of normally one week.- (LTROs) are liquidity-providing reverse transactions with a longer Maturity than the MROs-.Fine-tuning operations can be executed on an ad hoc Basis tomanage the liquidity situation in the Market and to steer interest rates.- . Structural operations can be carried out by the Eurosystem through reverse Transactions, outright transactions, and the issuance of debt Certificates
B. Standing facilities Granted by the Bank of Spain to authorized entities Operating in the market, standing facilities aim to provide and absorb liquidity:Marginal lending facility: Counterparties can use the marginal Lending facility to obtain overnight liquidity from the NCBs against the Presentation of sufficient eligible assets.-Deposit facility: Counterparties can Use the deposit facility to make overnight deposits with the NCBs.
C. Minimum reserves: It is intended that the entities Maintain a certain amount of liquidity reserves in the form of one or more Accounts with the central bank of the country where they are Operating. 

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