Impact of Monetary Policy on Inflation

In: Business and Management

Submitted By awais27
Words 789
Pages 4
On Wed, 7/20/11, Muhammad Ibrahim wrote:


From: Muhammad Ibrahim
Subject: Re: [FiNpRoS] Help to Find Thesis Topic Finance
To: FinProS@yahoogroups.com, "Rizwan karedia"
Date: Wednesday, July 20, 2011, 1:16 AM
Rizwan

This thesis topics will help you to select the research topic.

1 Determinants Of Capital Structure in cement industry of Pakistan
2 Impact of interest rate on stock market
3 A study based on the effects of interest rate (KIBOR) on share price
4 Market Interest rate and commercial bank profitability in Pakistan
5 Determinants of Corporate dividend payout policy
6 Effects of Free Cash flow on profitability of firms
7 Determinant of dividend payout ratio: A study of Pakistani fertilizer sector
8 Fundamentals and stock returns in Pakistan
9 Effects of mergers and acquisition in banking sector of Pakistan
10 Impact of Privatization of banks on profitability
11 Can risk aversion indicators anticipate financial crises?
12 Cash flow and capital spending relationship: evidence from automobile sector
13 Impact of Privatization on profitability and efficiency of banks in Pakistan
14 To study the relationship between price earning ratio and return on investment
15 A test of price earning ratio to predict future growths
16 Factors affect on the dividend payout ratio (sugar industry)
17 Impact of macro-economic variables on stock sector of Pakistan
18 Relationship between Cash flow and investment spending in textile industry
19 Impact of taxation on firm’s dividend payout/ratio
20 Share price volatility explicatedmeasured by fundamentals
21 Stock price and economic variables ( Interest rate, inflation and GDP)
22 Determinants of P/E Ratio
23 Impact of capital structure on profitability
24 Impact of interest rate changes on bank’s profitability
25 Relationship of stock market returns and rate of inflation
26 Dividend policy and…...

Similar Documents

Monetary Policy

...Monetary Policy Just what is Monetary Policy? Well, dependant upon to whom the question is being posed, the answer may slightly vary, but all in all the principle itself is still the same. Monetary policies are basically practices set forth to govern and ensure the stability, and growth of our economy. The Federal Reserve Board of Governors, who operates the Federal Reserve System, currently enacts such policies. Obtaining economic stability and growth requires the promotion of a healthy balance between consumer spending and inflation which can be achieved by understanding the history of how and why the Federal Reserve originally came to be, the basic tools used in Monetary Policy, and the administration and regulations set forth of such policies towards banks by the Federal Reserve. Prior to the Federal Reserve System, in the 1700s -1913, a more liberal approach to banking existed in the United States. During this period the banking system had primarily consisted of a large group of unrelated and unregulated banks with unrelated currency and no medium to clear it. However, the major problems imposed upon the economy, as a result of the lack there of such needed relativity, were all relative to the one simple fact: The current banking system was not doing its job and immediate action was needed. The banks playing a major role serving as a conduit for social and economic policy at the time were unreliable, and the economy reflected just that. The bank’s...

Words: 1047 - Pages: 5

Monetary Policy

...Sonia L. Godoy GM545 “You Decide project “ In order to try to get the US economy back in track we need to get as much support as we can, this means that we need to use both our Monetary and fiscal policies to get back on our feet. Monetary Policy We can use the Monetary policy to lower interest rates this will help the consumer to spend more and it will make borrowing less expensive it will boost demand and employment, this will be an Expansionary monetary policy. On the other hand the exchange rate may fall which can cause imported inflation, which may increase consumer spending on imported goods and services. Another approach which I don’t recommend in our economy is a Contractionary monetary policy on this approach we will reduce the price of inflation and the interest rate will rise. When interest rates increase spending falls consumer saves more and borrow less, also the foreign exchange rate of the national currency may rise, which makes imports less expensive, and then consumers are able to buy more imports instead of home goods. Firms can cut output and employment because of the lower demand, banks will pay more to borrow from the central bank then they will have to charge a higher interest rate to their costumers making loans less attractive. There will be a reduction in capital investment by firms which will reduce their ability to increase output in the future. This will not help our current economy because higher interest rates may reduce...

Words: 873 - Pages: 4

Monetary Policy

...Monetary Policy Difference between fiscal and monetary policies. Comparison of BAM and FED. Regulations implemented by these two Central Banks. Impacts of monetary policies. Risks taken during crisis. Macroeconomics   INDEX 1) Difference between Monetary and Fiscal Policy 2) The Crisis 3) The United States (Federal Reserve) 4) Morocco 5) Pro’s and Con’s of Fed’s Policy 6) Impact of Central Bank of Morocco on Morocco’s economy 7) Risk of FED’s Policy 8) Best Policy for Long-Term Growth Difference between Monetary and Fiscal Policy Fiscal policy and monetary policy are the two main policies with which an economy can be controlled. They both are used to the main goal which is to keep an economy at its best, and keep the currency at its true value, by controlling the basic difference between these two policies is that fiscal policy is applied by the national government whereas the monetary policy is implemented by the Central Bank. These two policies, however, work together in controlling the economy effectively, they stimulate and restrain an economy when needed. Fiscal policy involves government spending and taxes, whereas monetary policy deals with setting interest rates and supplying money. Fiscal policy concentrates on the strategy with which it will implement taxes in the country and the way it should spend that money...

Words: 383 - Pages: 2

Monetary Policy

... spending habits, and specifically the goal of the stable pricing of goods. The banks pass on their interest rate to their customers. The daily interest rate is crucial for the operating goals of the central banks and at the same time determines the starting point for the yield curve, since long-term interest rates are the primary focus for consumers and investors. Successful money politics incorporate common, valid, and trustworthy concepts. How does monetary policy influence inflation and employment? Changes in financial conditions affect economic activity. For example, when short and long-term interest rates go down, it becomes cheaper to borrow money, so households are more willing to buy goods and services; while firms are in a better position to purchase items to expand their businesses, i.e. property and equipment. Firms respond to these increases in total (household and business) spending by hiring more employees and increase production. As a result of these factors, household wealth increases, stimulating demand and additional spending. The links from monetary policy to production and employment do not take effect immediately and are influenced by a variety of factors, which makes it difficult to accurately evaluate the effect of monetary policy on the economy. Monetary policy also has an important impact on inflation. When the discount rate is reduced, stronger demand for goods and services tends to push wages and other costs higher, reflecting the greater......

Words: 1661 - Pages: 7

A Study of Impact of Rbi Policy Rates on Inflation

... A Study of Impact of RBI policy rates on inflation *Prof. Pallavi Ingale Introduction The Reserve Bank of India (RBI) is the Indian central bank. The RBI’s most important goal is to maintain monetary stability - moderate and stable inflation in India. The RBI uses monetary policy to maintain price stability and an adequate flow of credit. Rates which the Indian central bank uses for this are the bank rate, repo rate, reverse repo rate and the cash reserve ratio. The Reserve Bank of India (RBI) raised repo and reverse repo rates 13 times in previous year. RBI also deregulated savings bank deposit rate with immediate effect. This step was taken to arrest rising inflation in Asia's third largest economy. But this RBI's decision to hike short-term lending and borrowing rates could lead to higher interest rates and impact the growth momentum of the economy. An Indian company has postponed expansion plans and review future profitability projections after the Reserve Bank of India raised key interest rates. The central bank also revised the GDP growth rate for FY11-12 to 7.6% from the earlier 8%, while the projection of WPI inflation has been kept unchanged at 7% for March 2012. Reserve Bank of India (RBI) The Reserve Bank of India was inaugurated as on April 1 1935. Originally, the Reserve Bank was constituted as a shareholders’ bank based on the model leading foreign central banks on that time. The bank ‘s fully paid share capital was Rs. 5 Crores divided into shares of Rs. 100...

Words: 3452 - Pages: 14

Monetary Policy

... rates, keeping in view the developments in credit and money supply, as well as a host of other factors which may influence the underlying rate of inflation. The CBE strongly believes that real negative interest rates are inconsistent with the ongoing effort to reduce inflation rates. The continued reduction of the inflation rates that Egypt has witnessed in recent months is important in order to guide long-tem inflation expectations.Monetary Policy Implementation Monetary policy decisions are taken by the CBE’s Monetary Policy Committee (MPC), which has nine members comprising of the Governor of the CBE, the two Deputy Governors, and six members of the Board of Directors. Decisions are implemented through a set of policy instruments and procedures. The CBE will use two standing facilities (an overnight lending facility and an overnight deposit facility) as its main policy instruments, providing the outer bounds of a corridor within which the overnight inter-bank rate will fluctuate. The CBE will continue to manage market liquidity through its open market operations.  Monetary Policy Decisions The MPC will normally convene on the first Thursday of each month for the purpose of deciding on its policy rates and will issue a communiqué immediately following its meetings. Should a Thursday fall on a public holiday, the MPC will meet on the following business day. | How does the MPC decide on the interest rate?  The Monetary Policy Department prepares briefing material for......

Words: 769 - Pages: 4

Impact of Monetary Policy on Inflation

... Business Location Decisions 45 Ramadan effect on Karachi stock market 46 Effect of gross domestic product on commercial bank’s profitability in Pakistan 47 Difference between overall efficiency results of conventional and Islamic banks 48 Influence of inflation corporate financing discussion of firms 49 Impact of capital structure on banks performance 50 Impact of expense ratio on Mutual Fund Returns 51 The impact of interest rate and CPI on consumer lending 52 Impact of privatization on the profitability of banks 53 Impact of liquidity on market capitalization 54 Rate and size of T-bill determinants of KIBOR 55 Impact of economics indicators on loans to private sector 56 Increase in stock prices due to increase in Foreign Investment in Pakistan 57 Impact of taxes on corporate dividend policy 58 The impact of crude oil price on KSE_100 index 59 Impact of dividend policy on shareholder’s wealth 60 Impact of liquidity ratios on profitability 61 The impact of financial ratios and financing constraints on a firm 62 Factors affecting corporate liquidity 63 Impact of stock market volatility on equity premium 64 Factors explaining the bank profitability 65 Affects of taxes of financing decisions on firm value 66 Intensive bank relationship and firm performance 67 Affect of public debt on GDP and exchange rate 68 Impact of discount rate changes on stock market return 69 Relationship between capital structure and firms performance 70 Relationship between......

Words: 789 - Pages: 4

Monetary Policy

... Real money balances (M) Source: Mishkin; p109 Mishkin (2004) stipulates that an increase in the money supply due to expansionary monetary policy by the central bank implies that the supply curve for money shifts to the right. As is shown in Figure 1 by the movement of the supply curve from Ms1 to Ms2, the equilibrium moves from point 1 down to point 2, where the Ms2 supply curve intersects with the demand curve Md and the equilibrium interest rate has fallen from i1 to i2. In other words when the money supply increases (everything else remaining equal), interest rates will decline. Economic Growth Long term economic growth depends on increasing productivity, an expanding work force and the accumulation of capital. Monetary policy can affect economic growth by influencing spending which is a key component of Gross Domestic Product (GDP). Spending can be influenced through changes in interest rates. Lower interest rates make borrowing easier which encourages more spending. In this way expansionary monetary policy, which lowers interest rates, increases the accumulation of assets such as stocks and real estate. As asset prices rise, consumer’s wealth increases as well, leading them to more spending thereby generating growth in economic activity. Price Stability Mishkin (2004) defines price stability as low and stable inflation. This......

Words: 805 - Pages: 4

Monetary Policy

...Monetary policy in Kazakhstan 5. The monetary policy stance remains appropriate. Notwithstanding recent hikes in administered utility prices, inflationary pressures and growth in monetary aggregates have been relatively contained. With projected headline inflation hovering around the midpoint of the objective range (6-8 percent) and core inflation stable, the National Bank of Kazakhstan (NBK) is expected to keep its policy interest rate on hold in the coming months. This stance may need to be reevaluated if excess liquidity in the banking system translates into more rapid private sector credit expansion or if fiscal policy turns out looser than currently expected. 7. Strengthening monetary policy further will require introducing a policy rate that signals better the stance of policy and enhancing the communication strategy. The official refinancing rate, the NBK’s policy interest rate, has played little role in guiding key market interest rates. The envisaged repo instrument could become the new policy rate (preferably within a narrower interest rate corridor) to guide better key money market rates, hence bolstering the signaling effects of monetary policy. Moreover, to anchor expectations about policy intentions and operations, the NBK should communicate more openly and clearly the transition plans to active OMOs, and more generally elaborate on the factors guiding the interest rate and exchange rate intervention decisions in the NBK’s post-meeting communiqué and......

Words: 296 - Pages: 2

Monetary Policy

.... This issue attracts lots attention during the past century. For example, Jorgenson and Stephenson (1967) report a mean lag of seven quarters between changes in the rental price of capital and investment in US manufacturing, while Shapiro (1986) estimates that, in response to a shock to the required rate of return on capital, more than half the adjustment in the manufacturing capital stock occurs in the first year, but it takes over four years to be completed. The transmission mechanism decides this phenomenon. The first source of monetary policy lags is the delay in pass-through of changes in the overnight cash rate to other interest rates. And then the lags arise from the gradual response of investment. The exchange rate effects on the traceable sector of the economy are also gradual and prolonged. Even though it’ s hard to calculate the actual year of lags, there is still strong evidence of an impact on output growth in the first, second and third years after a change in the domestic short-term real interest rate. So if we don’t pay attention to this issue, maybe we don’t know when we need to stop the aggressive monetary policy. If we taper too late, the lag effect can deteriorate the economy and aggregate inflation. So that’s one of the reason when the US noticed the inflation expectation in 2013, starting to taper the QE plan. The third limitation of monetary policy happened during the deflation. In certain situation, it has the liquidity trap, which is defined as a...

Words: 2416 - Pages: 10

Monetary Policy

...Monetary Policy in the United States: A Brave New World? Stephen D. Williamson This article is a reflection on monetary policy in the United States during Ben Bernanke’s two terms as Chairman of the Federal Open Market Committee, from 2006 to 2014. Inflation targeting, policy during the financial crisis, and post-crisis monetary policy (forward guidance and quantitative easing) are discussed and evaluated. (JEL E52, N12) Federal Reserve Bank of St. Louis Review, Second Quarter 2014, 96(2), pp. 111-21. en Bernanke chaired his last Federal Open Market Committee (FOMC) meeting in January 2014 and departed from the Board of Governors on February 3 after eight years as the head of the Federal Reserve System. So, the time is right to look back on the Bernanke era and ask how central banking has and has not changed since 2006. There is plenty in the macroeconomic record from 2006 to 2014 to keep economists and policy analysts busy for many years, so in this short piece we can only scratch the surface of what is interesting about the Bernanke era. I will focus on three issues: (i) inflation targeting, (ii) Fed lending and other interventions during the financial crisis, and (iii) post-crisis Fed policy, in particular experiments with forward guidance and quantitative easing (QE). B INFLATION TARGETING When Bernanke began his first term in 2006, I think the big change people expected was an inflation-targeting regime for U.S. monetary policy, similar to what exists in...

Words: 6247 - Pages: 25

The International Bond Market Impact of Unconventional Monetary Policy

... review Extensive researches have analysed the QE policy transmission mechanism and investigated the effect of this unconventional policy. Joyce et al. (2012) discussed why central banks need to implement the conventional monetary policy. The two most straightforward reasons are that when the interest rate closes to zero, the conventional monetary policy which usually lowers the interest rate becomes inefficient, and that after the real estate bubble bursting, banks preferred holding fund rather than lending. The combination of these two reasons force central banks seeking for other ways to intervene the market – the unconventional monetary policy, which also knew as QE. Then, Joyce et al (2012) stated the possible channels they believed that QE program may act through – the portfolio balance channel and the bank funding channel. They provided empirical evidences about that the QE programs of Fed and BOE did have significant long-run effects on long term interest rate, but not limited bond prices. Finally, they summed up that QE do exert positive impact on Gross Domestic Product (GDP), inflation and unemployment rate etc. Fawley and Neely (2013) detailed the four central banks’ Quantitative Easing programs form September 2008 – the bankruptcy of Lehman Brothers – to December 2012. They pointed out that the unconventional monetary policies adopted to boost up the economy are various across central banks. The design of the QE policy depended on their respective economy......

Words: 15890 - Pages: 64

Monetary Policy

..., banks cannot make new loans. When banks cannot make new loans, the economy slows down. The reserve requirement is used as a monetary policy tool. When the Fed sets high reserve requirements, there will be less money in circulation increasing the purchasing power of existing money. The Fed can entice banks to hold excess reserves by paying interest on reserves. This interest on reserves is another monetary tool used by the Fed to improve economic growth. 6. The sources of changes in interest rates outside of Fed actions, and the ways such changes in interest rates might complicate the Fed’s exit strategy. Interest rates change due to anticipated changes in income, anticipated change in inflation, and fear of ability of borrowers to repay their debt. 1. If income is expected to go up, the demand and supply of bonds will increase. But since the supply side (borrowers) are more sensitive to the market than demand side (investors) the supply-demand curve will shift down and to the right, increasing interest rate. 2. An increase anticipated inflation will increasing borrowing and decrease investments in bonds. This moves the supply-demand curve down, increasing interest rate. 3. The fear of the inability of borrowers to repay their debt increases demand for US T-Bonds. This phenomena is explained by the three investors behaviors: a. Flight to Safety: moving to less risky assets b. Flight to Liquidity: preferring assets that can be quickly sold for cash, at a......

Words: 1562 - Pages: 7

Impact of Monetary Policy on Stock Market

... and Statutory Liquidity Ratio which directly influence the money supply in the market with immediate effect without creating any distortions in the economy. Hence the efforts are made in this paper to study of impact of changes in Repo Rate, Reverse Repo Rate, Cash Reserve Ratio and Statutory Liquidity Ratio adopted by the monetary authorities on return on stock market on the date of announcement of policy. 6.2 MONETARY POLICY OF INDIA Monetary policy is the process by which monetary authority of a country, generally a central bank controls the supply of money in the economy by exercising its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the Reserve Bank of India (RBI) is so designed as to maintain the price stability in the economy. MONETARY OPERATIONS Monetary operations involve monetary techniques which operate on monetary magnitudes such as money supply, interest rates and availability of credit aimed to maintain Price Stability, Stable exchange rate, Healthy Balance of Payment, Financial stability, Economic growth. RBI, the apex institute of India which monitors and regulates the monetary policy of the country stabilizes the price by controlling Inflation. RBI takes into account the following monetary instrument in order to maintain price stability and achieve high economic growth: REPO RATE Repo (repurchase) rate is the rate at which the RBI lends shot-term money......

Words: 9604 - Pages: 39

Monetary Policy

...To what extent is monetary policy the most effective way of stimulating economic growth? Refer to at least one example of a developed economy in your answer. (30 marker) Monetary policy is the actions of a central bank, currency board or other regulatory committee, usually the MPC, that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as modifying the interest rate, buying or selling government bonds, and changing the amount of money banks are required to keep in the vault (bank reserves). The primary way of promoting economic growth is the manipulation of interest rates. Lowering the interest rates, have a significant affect on the Aggregate Demand of country, most significantly consumption. An interest rate is the rate at which interest is paid by borrowers for the use of money that they borrow from lenders. If an interest rate is low, then the return from saving becomes less. As a result, a lower interest rate promotes an increase in consumption, whilst discouraging increased savings. Consumption makes up 60% of Aggregate Demand, so an increase in consumption will most likely lead to an increase in AD. As shown on the diagram, shifting from AD-AD1, leads to an increase in Real Output from Y-Y1, which will stimulate economic growth. However, following the financial crash the UK set a base interest rate of 0.5% and it has remained at the level since. As a result, it...

Words: 568 - Pages: 3