Monetary Policy of Bangladesh

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Monetary Police

Monetary policy is the term used by economists to describe ways of managing the supply of money in an economy. Monetary Policy is the management of money supply and interest rates by central bank to influence prices and employment for achieving the objectives of general economic policy. Monetary policy works through expansion or contraction of investment and consumption expenditure.

According to Paul Einzig
“Monetary policy includes all monetary decisions and measures irrespective of whether their aims are monetary and non-monetary, and all non-monetary decisions and measures that aim it affecting the monetary system.”

According to Harry G. Johnson
“Monetary policy employing the central bank’s control of supply
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For developing economies like Bangladesh with significant underemployment/under exploitation of production factors, stimulating higher growth is imperative for rapid reduction and eventual elimination of endemic poverty, and is therefore an overriding priority. The stimulus provided by monetary policies in accommodating the growth aspirations must not however over step towards macroeconomic imbalance destabilizing and jeopardizing future growth; and the pursuit of monetary policies comprise the continual balancing act of supporting the highest sustainable output growth while adjusting smoothly to internal and external shocks that the economy encounter from time to time.

The primary objective of the Monetary Policy of Bangladesh is to outline the formulation and implementation of monetary policy of the Bangladesh Bank (BB), and to convey its assessment of the recent and the expected monetary and inflation developments to the stakeholders and the public at large.

The Bangladesh Bank Order of 1972 outlines the main objectives of monetary policy in Bangladesh, which comprises— ■ To achieve the price stability.

■ To regulate currency and reserves.

■ To promote and maintain a high level of production, employment and real income, and economic growth, since independence BB operated under a variety of pegged exchange rate systems amid capital controls.

■ To manage the monetary and credit system.

■ To maintain the
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