Nicaragua And Its Monetary Policy Analysis Essay - 1348 Words

Nicaragua and its Monetary Policy analysis: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity. The Monetary Policy of a country further contains 3 sub-policies: †¢ The Money Supply Policy: This policy determines the source of credit. In most cases, a central bank of a country acts the source. †¢ The Interest Rate Policy: This policy determines the cost of credit. †¢ The Credit Control Policy: This policy determines the quantum of credit. Monetary Policy works on the fundaments of a money market and LM curve is the locus of equilibrium between the interest rate and income in the money market. LM curve determines the supply side of money and is positively sloped w.r.t to interest rate and income. Like many Latin American countries, Nicaragua is a socialist country and hence, functions with a deficit budget. Deficit, if remained uncontrolled, has the potential to induce inflation in an economy. As in August, 2015, the inflation rate recorded in its economy was 2.70%. However, with its average inflation rate being 9.35% in the period of 1993-2015, it had achieved a highest rate of inflation in September 1993 at 23.99%. (Banco Central de Nicaragua estimated) The central bank of Nicaragua focuses on an objective of sustaining economicShow MoreRelatedThe Reagan Doctrine Of President Reagan1228 Words   |  5 Pagesâ€Å"doctrine† definition is â€Å"A statement of authorized government policy, especially in overseas concerns and military strategy† (â€Å"Doctrine†, n.d.). The expression Presidential doctrine means an ideological platform that a president uses to spread a policy towards a country or region in order to accomplish foreign policy objectives for the United States. 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