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

Government bonds, Government securities are the most important and un...

Government securities are the most important and unique financial instruments in the financial markets of any economy. Government of India Securities (GOI Sec) in

Define the matching principle of working capital financing, What is the mat...

What is the matching principle of working capital financing?  What are the advantages of following this principle? The matching principle is while short-term financing is employe

Types of dividend policy, TYPES OF DIVIDEND POLICY 1. Regular dividen...

TYPES OF DIVIDEND POLICY 1. Regular dividend policy: Payment of dividend at standard rate is known as regular dividend policy. 2. Stable dividend policy: Payment of fix

What is gatt, What is GATT, and what is its goal? GATT is the General A...

What is GATT, and what is its goal? GATT is the General Agreement on Tariffs and Trade it is a agreement that seeks to decrease trade barriers among participant nations.

Financial Management, Financial Management Initial Disclosures During the ...

Financial Management Initial Disclosures During the process of discussion and negotiation with the client with regard to the financial affairs and the manner of operations of the

Investigate the functions for horizontal asymptotes, Q. Investigate the fol...

Q. Investigate the following functions for both horizontal and vertical asymptotes, x and y-intercepts, and state the domain and range of each and where the function is increasing

Explain the term- quality of decisions, Explain the term- quality of decisi...

Explain the term- quality of decisions Performance and business risk This is focussed on " quality of decisions ". The comparison of an organisations performance with t

Evaluate the strength of the human development, In 2005, Mr. Gordon Brown's...

In 2005, Mr. Gordon Brown's brought up a plan of action to help reduce poverty and boost economic development in Africa. The three essential elements of the 2005 development plan

Determine the present value of store, Assume that ABC is considering openin...

Assume that ABC is considering opening an ice cream shop in Amsterdam. The shop will cost 1.8 million Euros, and the present value of the expected cash flows from the store is 1.4

What do you mean by business risk, Q. What do you mean by Business Risk? ...

Q. What do you mean by Business Risk? Business risk is that portion of the unsystematic risk caused by the operating environment of the business. Business risk arises from the

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