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Economics Assignment - Global Financial Crisis

   

Added on  2020-11-12

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ECONOMICS
Economics Assignment - Global Financial Crisis_1

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................1Examine effectiveness of the monetary policy pursued by the Bank of England since the GFC......................................................................................................................................................1The additional responsibility of growth and employment objectives disruption by monetaristsand Keynesian.............................................................................................................................3Effectiveness of interest rate policies and creation of bubbles...................................................4QE policy been effective and has destabilised prices.................................................................5Banks role in managing the liquidity and steady monetary growth and their responsibilities forcapital adequacy..........................................................................................................................6CONCLUSION................................................................................................................................6REFERENCES................................................................................................................................7
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INTRODUCTIONMonetary Policy is a term which defines the process adopted by the monetary regulatoryand authority council of the country. The policy related to monetary transactions are formulatedand regulated by the Central Bank or by the Currency Board of the country whose role is tocontrol money supply in country, cost associated with short term borrowings, inflation rate,exchange rate or interest rate (Galí, J., 2015). It also emphasizes on the stability of prices in thecountry for better development and consumption. This report has discussed factors related to theGlobal Financial Crisis and effectiveness of monetary policy pursued by bank of England (Galí,J., 2015).MAIN BODYExamine effectiveness of the monetary policy pursued by the Bank of England since the GFC.Monetary Policy defines the process of how the central banks control the flow of moneysupply, liquidity, inflation rate, interest rate and cost of short term borrowings within the countryeconomy (Galí, J., 2015). It also emphasizes on reducing the unemployment level & bringing inprice stability.The global financial crisis begins in 2008, with the bankruptcy of Lehman Brothers afterdeclining of the Federal Reserve Bank to participate in creating a financial support for LehmanBrothers. The Emergency Economic Stabilization Act of 2008 was passed by the U.S. PresidentGeorge W. Bush on October 2, 2008 to bring stability in the economy caused by Sub-primeMortgage Crisis (Galí, J., 2015).How effective was the MPC in dealing with the financial crisis?The Monetary Policy Committee role is to decide the official interest rate as applicablein the United Kingdom i.e. the Bank of England Base Rate. It is responsible for formulatingmonetary policy of the United Kingdom, by setting the rate at it which it lends to banksofficially the Bank of England Base Rate or BOEBR for short period (Saito, Y., 2018).The role of Monetary Policy Committee in dealing with the financial crises are as follows:1.The Bank of England’s Open Market Operations has been reformed to reduce thediscretion level thereby providing access to financial markets with greater certainty.1
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