Monetary Policy

Governmental policies used to guide the value, usage, and flow of money in a region.

Monetary policy is an economic term that refers to the set of guidelines or principles that guide the value, use, and flow of money within an established political region. This policy is not arbitrary but is always introduced and implemented by the government of the region, thereby determining the total volume of currency available at any one time.

Traditionally, monetary policy is used to guard against unfavorable economic conditions such as inflation. However, they can also be used to drive up the value of a fiat currency via interest rate manipulation. Thus, monetary policy is a fundamental economic mechanism with severe implications upon misuse.