Macroeconomics Help

Monetary Policies Monetary Policies 1990-2000

Brittany Fitzhugh

Southern New Hampshire University

Monetary Policy-Inflation rates q The inflation rate was quite low in the 1990s.

q The financial boom during this period supported economic prosperity greatly.

q The government managed to increase taxes and cut down on its spending during this period (King & Low, 2014).

Monetary Policy-Bank Rates q The bank rates managed to remain constant during this period at 8.375%.

q According to experts, this consistency was attributed to the low inflation and

economic prosperity (Adam & Billi, 2014).

q The stable interests rates enabled more people to borrow from banks and invest in

other productive activities.

q The interest rates started increasing in early 2000s as the economic recession

started taking hold.

Monetary Policy-Exchange Rates q The exchange rates managed to remain stable during this time.

q The US. Dollar managed to hold against the other currencies.

q According to research, if a country is more productive than others, then its currency also appreciates (Baker et al., 2016).

q This explains why the US. Dollar was quite strong when compared to other currencies.

Monetary Policy-Open Market Operations

q Open market operations are usually used by the state to sell and buy

securities such as bonds (Reifschneider et al., 2015).

q Due to stability and low rates of inflation, the government sold a few

bonds to keep the money flow stable.

q However, the economic recession that arose in the early 2000s caused the

government to sell bonds in an attempt to increase money circulation in

the economy.

References v Adam, K., & Billi, R. M. (2014). Distortionary fiscal policy and monetary

policy goals. Economics Letters, 122(1), 1-6.

v Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636.

v King, M., & Low, D. (2014). Measuring the ''world'‘ real interest rate (No. w19887). National Bureau of Economic Research.

v Reifschneider, D., Wascher, W., & Wilcox, D. (2015). Aggregate supply in the United States: recent developments and implications for the conduct of monetary policy. IMF Economic Review, 63(1), 71-