As One Hand Gives, the Other Takes Away
The central bank has increased its policy rate by 0.5 percent and increased it funding to commercial banks.
However, the negatives could outweigh the positives because increased interest rates make loans more expensive. Investment resources will get more expensive too, which would disturb business and the of the market balance that makes credit possilbe.
They also put pressure on the market. The reasons for inflation must be carefully considered. According to economic theory, there are two criterium to consider. On the one side is demand and the other is supply. Supply shocks create inflation. Today’s monetary policy is eroding demand and closing wallets. It’s possible to tackle inflation by reducing assets with an interest rate policy. However, inflation can’t be solved by monetary policy alone.
2. Wage rises and cash distributions are creating inflation. Also peole who are taking advantage of the sensitivity of the market are part of the problem.
For example, there is the price of meats. Every spring prices rise and push up inflation because it depends purely on supply. So employing a monetary policy for inflation that is created by conditions withihin the economy itself is useless. It won’t be effective. For that reason, the causes of inflation must be separated and quantified by their influences on supply and demand.
It is the responsibility of the government, not the central bank, to wipe out the causes of inflation. In addition to monetary policy, government regulation is another market influence.
The government must take responsibility for meat scarcity. The central bank and the government must reach a mutual agreement. Distributing cash leads to an underdeveloped industry that can’t produce anything. It is concerning that the government does not explain its supply policy, which would increase product provisions.
Thus, the central bank has decided to close demand, which is a preventive action against inflation and product scarcities. In the end, all of the reasons for a policy must be agreed upon. Introducing a policy that distibutes on one side and restricts on the other is innefective, as we’ve witnessed for the last four years.
3. The winners of the election will lead the government and enforce its policies. Money plays a crucial role in a country like Mongolia, where the government operates only to fulfill the promises it made. When huge sums of money rush into the market, the results is a bubble because no real industry has been developed anywhere else.
To prohibit policy makers from acting on their own free will, the central bank holds onto the money. Its regulations allow it to give loans to government. If the goverment has the final word, then the central bank is left as the creditor.
However, the government must repay its loan within three months. It is uncertain if it can repay the loan it recently took out so soon. Even the next government might not be able to manage. The prime minister and the president of the central bank have equal standings. The prime minister is not allowed to give orders to the central bank president. That’s illegal. If the president of the Bank of Mongolia was not chosen by Parliament and was regulated by a diffferent law, it would be even more independent.
Apparently the Bank of Mongolia consider these measures acceptable in Mongolia’s current state. Is there any guarantee that inflation will not rise again?
The Mongolian economy is expanding very fast. Some believe using interest rates to control inflation is inconvenient, and say the central bank should change its interest rate policy. Is this really the best method?
The Bank of Mongolia has been given the government a loan to pay for the MNT 21,000 monthly allowances from the Human Development Fund after it ran short on Funds. Was this legal? How does this affect the independence of the central bank?
What effect will elections have on interest rates?
1. The only way for the Bank of Mongolia’s to tackle inflation seems to be with its policy interest rate. There is no other option left for the central bank. As a result of its policy, inflation can be maintained at a reasonable level.
The Mongolian economy is expanding very fast. Some believe using interest rates to control inflation is inconvenient, and say the central bank should change its interest rate policy. Is this really the best method?
The Bank of Mongolia has been given the government a loan to pay for the MNT 21,000 monthly allowances from the Human Development Fund after it ran short on Funds. Was this legal? How does this affect the independence of the central bank?
What effect will elections have on interest rates?
1. The only way for the Bank of Mongolia’s to tackle inflation seems to be with its policy interest rate. There is no other option left for the central bank. As a result of its policy, inflation can be maintained at a reasonable level.
However, the negatives could outweigh the positives because increased interest rates make loans more expensive. Investment resources will get more expensive too, which would disturb business and the of the market balance that makes credit possilbe.
They also put pressure on the market. The reasons for inflation must be carefully considered. According to economic theory, there are two criterium to consider. On the one side is demand and the other is supply. Supply shocks create inflation. Today’s monetary policy is eroding demand and closing wallets. It’s possible to tackle inflation by reducing assets with an interest rate policy. However, inflation can’t be solved by monetary policy alone.
2. Wage rises and cash distributions are creating inflation. Also peole who are taking advantage of the sensitivity of the market are part of the problem.
For example, there is the price of meats. Every spring prices rise and push up inflation because it depends purely on supply. So employing a monetary policy for inflation that is created by conditions withihin the economy itself is useless. It won’t be effective. For that reason, the causes of inflation must be separated and quantified by their influences on supply and demand.
It is the responsibility of the government, not the central bank, to wipe out the causes of inflation. In addition to monetary policy, government regulation is another market influence.
The government must take responsibility for meat scarcity. The central bank and the government must reach a mutual agreement. Distributing cash leads to an underdeveloped industry that can’t produce anything. It is concerning that the government does not explain its supply policy, which would increase product provisions.
Thus, the central bank has decided to close demand, which is a preventive action against inflation and product scarcities. In the end, all of the reasons for a policy must be agreed upon. Introducing a policy that distibutes on one side and restricts on the other is innefective, as we’ve witnessed for the last four years.
3. The winners of the election will lead the government and enforce its policies. Money plays a crucial role in a country like Mongolia, where the government operates only to fulfill the promises it made. When huge sums of money rush into the market, the results is a bubble because no real industry has been developed anywhere else.
To prohibit policy makers from acting on their own free will, the central bank holds onto the money. Its regulations allow it to give loans to government. If the goverment has the final word, then the central bank is left as the creditor.
However, the government must repay its loan within three months. It is uncertain if it can repay the loan it recently took out so soon. Even the next government might not be able to manage. The prime minister and the president of the central bank have equal standings. The prime minister is not allowed to give orders to the central bank president. That’s illegal. If the president of the Bank of Mongolia was not chosen by Parliament and was regulated by a diffferent law, it would be even more independent.
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