Policy conflicts in debt and monetary management, Financial Management

Policy Conflicts in Debt and Monetary Management:

Co-ordination of operations is important so as to avoid differences in the policies of cash and debt management of the government and central bank. This is particularly required keeping in view the fact that the timing and volume of issues of Government Securities need not always coincide with the monetary regulations of the central bank. The central bank needs to consider the liquidity provision if the Government wants to issue securities at a time when the market is illiquid. In such cases the central bank can provide liquidity through the secondary market or through the primary market where the central bank manages both the debt and monetary policy.

At present it can be said that, almost in all countries the central banks are working in tune with the fiscal authority, both at the policy formulation and implementation levels of debt management. Generally it is said that being an agent to the fiscal authority can be problematic for central bank and this can be reduced if the debt management function is separated from the central bank. Such separation should be preceded by institutional and technological infrastructure, fiscal control and developing financial markets otherwise, high fiscal deficit could increase the risk of instability in the economy.

In its recent monetary policy statement, the RBI made its intentions clear about the separation of the debt management function in this regard and the conditions that have to be fulfilled to separate the debt management function. The conditions are: development of financial markets, adequate control over the fiscal deficit and necessary legislative changes. Also, institutional framework for setting up a separate Debt Office for managing the debt functions should be planned. The debt of both central and state governments can be managed by setting up an independent corporate structure.

 

Posted Date: 9/10/2012 7:47:02 AM | Location : United States







Related Discussions:- Policy conflicts in debt and monetary management, Assignment Help, Ask Question on Policy conflicts in debt and monetary management, Get Answer, Expert's Help, Policy conflicts in debt and monetary management Discussions

Write discussion on Policy conflicts in debt and monetary management
Your posts are moderated
Related Questions
Role of Primary Dealers To promote the investment activity in the Government Securities market, several countries have adopted licensed Primary Dealers (PDs) as important inter

Clemson Software is considering a latest project whose data are given below.  The needed equipment has a 3-year tax life, after which it will be worthless,and it will be depreciate

Q. What do you mean by Wealth Maximization? This is also known as value maximization or net present worth maximization approach, it takes into consideration the time value of m

DISCUSS THE APPLICABILITY OF OPERATING CYCLE IN VEGETABLE GROWING.

What are the Reasons why organisations grow Required to provide higher financial returns to investors e.g. increases the wealth of shareholders Possible to achieve econ

What to do to maximise profits of the company If you want to maximise profits, there are only two methods to do it. Either you decrease your expenses (also known as costs) or y

Role of Trustee in Pension Fund: Trustees are people in control of long-term asset allocation of a pension scheme. Whatever benchmark they set will, as we shall see, influence

Consider a world with two assets: a riskless asset paying a zero interest rate, and a risky asset whose return r can take values +10% or -8% with equal probability. An individual h

Accounts receivable are sometimes not collected.  Why do companies extend trade credit when they could insist on cash for all sales? Extending trade credit almost all the time le

Q. Show the Present Value of a Single Flow ? Discounting or else Present Value of a Single Flow (Lump Sum):- We are able to determine the PV of a future cash flow using the for