Currency policy: general aspects

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:45

In the structure of the foreign economic policy of any state, the monetary policy plays a special role, which includes a set of measures to maintain the stability of the state currency and ensure foreign trade economic relations, which are aimed at achieving the intended macroeconomic development targets. Monetary policy is also considered as an integral part of the state's global macroeconomic system, along with such important components as the fiscal, monetary and structural investment systems. Let's consider this concept in more detail.

Currency policy is a mechanism for foreign exchange regulation and foreign economic strategic planning that determines the official position of the country regarding the control of the circulation of foreign exchange funds and certain exchange restrictions, as well as the exchange rate regime. The main instruments of the currencypolicies - subsidies, intervention and parities. Legally, this type of state policy is fixed by the currency legislation, which regulates the procedure for the implementation of gold and foreign exchange transactions throughout the country.

Currency policy includes such important components as the regulation of exchange rates, the management of the convertibility of the national currency and the policy of control of the state's gold and foreign exchange reserves. With the help of two polar opposite systems of regulation of exchange rates, the state determines one form or another of monetary policy. Distinguish between fixed and floating exchange rates. In the range between these options, many different combinations are possible, which gives particular flexibility to monetary policy.

The choice of the monetary policy regime pursued by the government of the country most fundamentally affects the level of prices for consumer goods sold both in the domestic and foreign markets. Monetary policy is an extremely dynamic structure, its form and elements can change under the influence of various factors in the evolution of the world financial economy, the economic situation of the country, the volume of industrial production, the balance of power in the world political arena and other equally important conditions.

The most effective method of conducting monetary policy is the motto system, which provides for the regulation of the national currency rate through the purchase and sale of foreign funds. Such a system can take various forms. For example, currency restrictions and intervention, diversification of gold reserves and others.

Now there are more than a dozen different monetary policy regimes in the world. Some governments, when conducting large-scale economic reforms, resort to the strategy of a dual currency market, which involves the division of a single system into two components: the official sector used for commercial transactions, and the market sector, which conducts various financial and exchange transactions.

But the traditional methods of monetary policy still remain devaluation (depreciation of one's own currency against the dollar) and revaluation - an increase in this rate.