Policy conflicts in debt and monetary management, Financial Management

Assignment Help:

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.

 


Related Discussions:- Policy conflicts in debt and monetary management

Interest rate parity, QUESTION 1 (a) What are the differences between f...

QUESTION 1 (a) What are the differences between futures and forwards? (b) Clearly explain the following position on options i) Going long on a call option ii) Going lo

Commercial paper, What is Commercial Paper? Please provide me report on Est...

What is Commercial Paper? Please provide me report on Estimation of Commercial Paper. It is about 2000 words count report on topic Commercial Paper.

Investable capital market portfolio, The Total Investable Capital Market Po...

The Total Investable Capital Market Portfolio According to a report prepared by McKinsey in January 2007, World financial assets including bonds, stocks, corporate debt securit

Types of asset-backed securities, Types ...

Types of asset-backed securities 1.  Auto Loan-Backed Securities (ALBs) 2.  Credit Card Receivab

Explain implications of deviations - purchasing power parity, Explain the i...

Explain the implications of the deviations from the purchasing power parity for countries’ competitive positions in the world market. Answer:  If exchange rate changes satisfy pu

Explain the rapid development of interest rate swap market, If the cost ben...

If the cost benefits of interest rate swaps would similarly be arbitraged away in competitive markets, what other descriptions exist to explain the rapid development of the interes

Coverage ratio, Coverage ratios give the relationship between the financial...

Coverage ratios give the relationship between the financial charges of a firm and its ability to service them. The four most commonly used coverage ratios are:

Credit markets, Credit Markets: The financial system enables supply of ...

Credit Markets: The financial system enables supply of funds to support purchase of goods and services and to finance capital investments. In this way, it provides funds both t

Banking sector securities, The banking sector has a vital and active ...

The banking sector has a vital and active role in the money market. The transactions taking place in these securities are large in size, both in terms of volumes

International strategic management, undertake a critical review of the curr...

undertake a critical review of the current academic literature to determine the reasons for benefits of and the costs to companies of cross listing.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd