Section outline

  • Week 3: Monetary policy

    At the end of Week 3 you will be to demonstrate that you understand the Government’s role in the financial system and how monetary policy affects your finances.

    This topic will help you to understand what monetary policy is, who's involved in setting monetary policy, what it involves and how monetary policy affects your investments or borrowings.

    You will also be able to understand how fiscal and monetary policy are linked and how they impact on financial markets.

    Your tasks for Week 3

    Reading

    Please read the summary of pp287-289 Sloman and de Boer (2009) in the following file for an understanding of the role of the Reserve Bank of New Zealand.

    • The Central Bank File

    •  and the summary of pp322-331 Stewart and Rankin (2008) for an explanation of monetary policy.

    • Monetary Policy File

    • Please read the following factsheet explaining how the OCR works.

    • What is the OCR (link) URL
    • What is the OCR? (pdf) File
    • Effect of the OCR File

    •  To round off the discussions of fiscal policy and monetary policy, please read the summary of pp344-349 Stewart and Rankin (2008) which provides an explanation of how fiscal and monetary policy are linked.

    • The Link between Fiscal and Monetary Policy File

    •  Activity

      Follow the format of the Powerpoint presentation Effect of the OCR above and show the effect of a decrease in the OCR (it does not have to be in Powerpoint - it can be hand drawn if that's what you feel comfortable with). Please submit your diagram using the following link.

    • Submit your diagram of the effect of a decrease in the OCR using this link. Assignment

    • Additional resource

      For an alternative explanation of monetary policy you might want to read the following webpage:

    • A short explanation of monetary policy URL