Monetary policy   Goals of monetary policy   RBA Charter   Role of underlying inflation   Implementing monetary policy   Tightening of MP   Loosening of MP   How other rates change   Pre-emptive decisions   'Open mouth operations' Exchange rate intervention  Monetary policy stance   Expansionary policy  Monetary policy neutrality    Restrictive MP   Transmission mechanisms   MP and economic goals   low inflation Growth/jobs  MP strengths and weaknesses

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 Course notes quick navigation

1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Strengths and weaknesses of monetary Policy

A strength of a policy refers to an aspect that makes it a particularly powerful tool (when compared to another policy for example).  Similarly, a weakness or constraint of policy refers to an aspect that makes it less effective or powerful.  Success/failure of policy refers to an evaluation of how well the policy has performed in trying to achieve its stated goals.  A knowledge of strengths and weaknesses of policies will often help us to determine how successful policies have been over time.

Some strengths of monetary policy include the following:

'The government recognises the independence of the Bank and its responsibility for monetary policy matters and respects the Bank's independence as provided by statute'

[Despite this, it is possible for the government of the day to override the RBA in the event that there is a material policy difference between the RBA and the government.  In reality, this is a politically demanding process and is a course of action that is unlikely to be taken by any government.]

Some weaknesses of monetary policy include the following:

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