Saturday, August 22, 2009

Role of Monitary Policy

Now-a-days the monetary policy is very important both for the developed as well as for the developing countries. We can have the idea about the role of monetary policy for the developing countries like Pakistan from the points explained below.
1. The under-developed countries are aimed at a balanced economic growth, particularly they want to develop their backward regions and utilize the labour, capital and other natural resources at their disposal in a best way. For this purpose monetary policy can be helpful to us. As the loaning facilities to backward regions can be extended, the cheaper credit may be made available to the preferred regions and sectors, and more loans at cheaper rates for neglected areas can also be provided to start the process of economic development.
2. The economic development of a country depends upon technical changes, inventions and innovations and discovery of new models etc whether they have been imported of formulated at domestic level. Accordingly, monetary policy has to play its role for the sake of technical progress and inventions etc. As the producers who want to produce new goods can be provided the credit at soft conditions. In this way the process of development can be started.
3. The economy which is engaged in the process of economic development is in need of more capital so that the transaction of goods and services could easily be facilitated. The availability of more money will put to an end the non-monelized sector in the poor countries. The backward and self sufficient life of villages will come to an end.
4. Economic growth and industrial growth are compulsory to each other. The industrial growth can be possible if loans are provided in a greater amount. The entrepreneurs with greater funds would utilize the resources and produce more goods. The availability of loans can be made possible through money and capital market. The monetary policy can be helpful in establishing the monetary institutions.

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