Study of the Effectiveness of Monetary Policy in Stabilizing the Economy

Abstract

The activities done by a central bank to govern the amount of money and credit available in an economy are collectively referred to as "monetary policy." The basic purpose of monetary policy is to encourage economic development while simultaneously attempting to keep prices stable. Adjustments to interest rates, open market operations, and reserve requirements are some of the methods that central banks utilise in order to accomplish this goal using a variety of instruments. This study examines the conceptual underpinnings of monetary policy, covering both the classical and Keynesian points of view about the function that monetary policy plays in the economy. In addition to this, it investigates the past performance of monetary policy in a variety of nations, doing an analysis of the effect that varying interest rates, quantitative easing, and other policy instruments have had on economic expansion, inflation, and unemployment.