How does monetary policy affect the economy

Monetary policy

all measures with which the central bank in particular controls the money supply and the supply of money and credit to the economy. The most important goal is the security of the currency, i.e. the preservation of the monetary value within the economy (price level stability) and the stability of the purchasing power to the outside. Above all, this requires the control of the amount of money in circulation, because on the one hand money must be so scarce that the monetary value does not suffer, but on the other hand a sufficient supply of money to the economy must be guaranteed in order to be able to handle all financial transactions.

The money supply is controlled via measures to influence the interest rates through the interest rate policy (see there) and through the influence of the bank liquidity through the liquidity policy (see there). The Deutsche Bundesbank was responsible for monetary policy in Germany until the end of 1998 (see there). Since January 1, 1999, the European System of Central Banks (ESCB) with the European Central Bank (ECB) at the top has been responsible for monetary policy in the European Economic and Monetary Union (EMU). In order to fulfill its tasks, the ECB has various monetary policy means of the open market policy (see there), the minimum reserve policy (see there) and permanent facilities (see there), some of which correspond to the Lombard policy (see there) of the Bundesbank. The discount policy (see there) no longer exists.

Duden Wirtschaft from A to Z: Basic knowledge for school and study, work and everyday life. 6th edition. Mannheim: Bibliographisches Institut 2016. Licensed edition Bonn: Federal Agency for Civic Education 2016.