Hi everyone, last week we went through the basics of monetary policies and today, we will be diving into further details.
There are two main types of monetary policies : expansionary and contractionary
Expansionary Policy – Decreases interest rates to decrease the cost of borrowing money which increases the purchasing power of money and boosts spending in the economy.
Companies can spend more on goods and services and with increased production, countries can hire more employees, which ripples spending through the economy.
A major aim of an expansionary monetary policy is to reduce unemployment, as a higher money supply and attractive interest rates creates more jobs in an economy.
Contractionary Policy - Increases Interest rates to increase the cost of borrowing money and reduce the purchasing power of money which slows down spending in the economy to reduce inflation.
A major goal of a contractionary policy is to target high inflation levels.
Different countries have different names for their central banks, which influence monetary policies.
1. USA- ‘The Fed’ / Federal Reserve
2. Nigeria – ‘CBN’/The Central Bank of Nigeria
3. UK – The Bank of England
A monetary policy is quite different from a fiscal policy.
A fiscal policy is an additional tool used by governments, not central banks. The government can print money and send money directly/indirectly into an economy to spur growth(in theory).
Nigeria uses a hybrid of contractionary monetary policy alongside a fiscal policy that supports the printing of money.
The issue with Nigeria’s monetary policy is that the country underproduces goods for exports which leads to an oversupply of the Naira- other economies do not purchase the Naira often and we do not see the Naira available in various international Bureau De Change centres. There is low international import activity towards Nigerian goods, and the international market does not need to pay for anything the national currency.
My favourite podcast of the week:
Working hard and hardly working EP 31- do we share too much online?
This was a VERY important episode. The podcast expands on the journey of a fitness enthusiast (Sarahs Day) coming into the limelight and oversharing. I followed her myself a few years ago and it was interesting to see her go from posting very intense diets and spreading protein powder on toast to living a more holistic life and eating good food. It shows that with new information, people can change their convictions and and gave me a nudge to be weary of ‘copying’ any fitness influencers diet.