Muhammad Al-Jasser and Ahmed Banafe
Introduction Monetary policy is one of the ways in which the G everywherenment sight influence the economy. In Saudi Arabia, this task is carried out by the Saudi Arabian Monetary Agency (SAMA) as an broker of the Government. Monetary policy must pay attention to fiscal policy. Very often monetary policy is use to pop the effects of fiscal policy. Central banks have a stray of targets, which are given assorted emphasis at different times. Targets include short-term interest rates, growth rates of differentiate money and broad money, monetary conditions, inflation, the put back rate and another(prenominal) economic indicators. Complicated theoretical models of the economy are used by central banks to see how effective their policy has been over time. The job of selecting and hitting targets is problematic because it is often difficult to define whether changes are being accomplished by monetary policy or fiscal policy. Limitations to monetary policy in Saudi Arabia are due to the openness of the economy, with the riyal effectively pegged to the US dollar since the suspension of the SDR/riyal link in whitethorn 1981.
In practice, this has resulted in riyal interest rates about tracking dollar rates, often with a small premium, since the mid-1980s. It was argued in the past that domestic banks contributed substantially to capital outflow from Saudi Arabia, fanning intermittent bouts of speculation against the riyal, particularly when oil prices remained depressed. It was hard to set up the extent of the banks responsibility for dislocation in the riyal market, as the banks claimed that their extensive net foreign assets and large net foreign exchange positions were the result of liquidity management rather than a deliberate short positioning of the riyal. There is some credibility to the banks claim, given that their net foreign assets and net foreign exchange position were significantly...If you want to get a full essay, enjoin it on our website: Ordercustompaper.com
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