Monetary policy functions and transmission mechanisms: an overview
Monetary policy comprises the rules and actions adopted by the central bank to achieve its objectives. In most countries the primary goal of monetary policy is price stability. However, the mandate of many central banks also encompasses other objectives, including attainment of fullemployment, domestic financial stability, and normal operation of foreign payments. The priority of price stability over other policy goals tends to be politically accepted in most countries, if not actually enshrined in the laws governing the central bank.