Management of Banking and Financial Services, 4th Edition by Pearson

2

Monetary Policy—Implications

for Bank Management

CHAPTER TWO

SECTION I

BASIC CONCEPTS

A Macroeconomic View

T

he primary objective of a country’s government is to achieve economic stability and growth. Hence, mac-

roeconomic policies will typically target and monitor three basic indicators: prices, employment and bal-

ance of payments. Such monitoring is done through two fundamental pillars of macroeconomic policy—the scal

and monetary policies.

The scal policy targets two major parameters: tax receipts and government expenditure. While taxes

are garnered through the mechanism of tax rates that can be varied by the government from time to time,