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Journal: Economic Profile (Vol.14, No. 19)

Publication Date:

Authors : ; ;

Page : 27-39

Keywords : Monetary Policy; Monetary Regimes; Trilemma;

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In the modern world, monetary policy regimes play an important role in the country's socio-economic development. However, although the monetary policy regime may vary according to the country's development and historical experience, there are still common approaches and trends that are characteristic of many countries. Global and local changes, including financial and economic issues, are forcing scientists and monetary policy-makers to discuss best practices and new mechanisms. It is also noteworthy that the use of monetary regimes requires consideration of the individual characteristics of the country and the neglect of a number of factors can lead to ineffective planning and / or improper regulation of the well-being of the economy as well as the welfare of the state and the general population. Some countries still have a managed floating exchange rate, as some countries have some form of capital restriction. The Trilemma (The impossible Trinity) only operates when we have no restrictions on the movement of capital. Consequently, if the exchange rate and the interest rate are fundamentally irrelevant, they cannot act in the long run, but in the short term, the central bank can manage the exchange rate and use the interest rate as a monetary policy instrument. Since most countries have open economies, some central banks have goal for exchange rate stability, and most for price stability – also this is the first issue of the National Bank of Georgia (Main Directions and Functions of National Bank of Georgia, 2008). The monetary policy regime and its effective management is the most important function of the regulator, as it should stimulate economic development. While the main monetary policy regime in the modern world is price stability, it also discusses the importance of the exchange rate, as it can influence the target inflation rate and this has a particular impact on the economies of developing countries.

Last modified: 2021-02-23 15:10:34