If both foreign and domestic rates are constant,based on short term expedite possibility,nominal exhange rate depreciation leads real subsequent depreciation as proposed under the MARSHAL- LERNER conditions,and this affect aggregate income as well as exert influence on the balance of payment mechanism.
It is generally known that in the case study of expansionary monetary policy,there is reduction of official rates,similarly depleting the cost of credit that free lending to the private sector.This implies an expansion of lending and thus will use the liquidity excesss to buy financial assets,Consequently
,on the securities sector,that trajectory of upward pressure,on prices is ordinarily spurred by volatile but increasing domestic demand which also exerts further presssure on nominal interest rates,given the inflation expectation that reduces real interest rates.The atttendant evolution of demand boosts business investment and grow household consumption.
With this four mechanism,including level of information available,they not only played a paramount role in the context of high risk,high uncertainty,where operators not only make forecast but also directly forecast about economic fundamentals,with the level of information available and also the probity of the operators,cannot be detached from its growth motif .
Hence monetary policy mechanism is more or less,by which assets prices and general economic conditions are basically influenced or afffected by monetary policy decision.These decisions influence aggregate and monetary circulation and credit in order to affect aggregate economic performance.
It is generally known that in the case study of expansionary monetary policy,there is reduction of official rates,similarly depleting the cost of credit that free lending to the private sector.This implies an expansion of lending and thus will use the liquidity excesss to buy financial assets,Consequently
,on the securities sector,that trajectory of upward pressure,on prices is ordinarily spurred by volatile but increasing domestic demand which also exerts further presssure on nominal interest rates,given the inflation expectation that reduces real interest rates.The atttendant evolution of demand boosts business investment and grow household consumption.
With this four mechanism,including level of information available,they not only played a paramount role in the context of high risk,high uncertainty,where operators not only make forecast but also directly forecast about economic fundamentals,with the level of information available and also the probity of the operators,cannot be detached from its growth motif .
Hence monetary policy mechanism is more or less,by which assets prices and general economic conditions are basically influenced or afffected by monetary policy decision.These decisions influence aggregate and monetary circulation and credit in order to affect aggregate economic performance.
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