Answer to Question #242905 in Finance for vtg

Question

QUESTION 1:

As the economies of the whole world grow more interdependent, a country’s monetary policy can no longer be conducted without taking international considerations into account.

Using practical examples, discuss how the South African central bank’s Monetary Policy Committee (MPC) may use the following alternative monetary policy strategies.

i. Capital controls.

ii. Exchange targeting.

Answer 1

Capital controls may be used as regulations in prohibiting or restricting capital movements within the nation. This will assist in governing the nation's capital account based on the balance of payments which will assist in avoiding trafficking of illegal events.

Exchange targeting may be utilized in the financial institutions in intervening market mechanism which maintains exchange rate considering respective level they see effective.