(a) Analyse the activist and non activist policy makers' choice between executing a policy rule or a discretionary monetary policy.
(b) Describe why the policy rule is not credible and discuss the solutions to overcome this problem.
"Many countries in the world have moved towards a framework of conducting monetary policy as "Inflation Targeting". The Central Bank is supposed to follow monetary policy which is designed to accomplish a stated objective with regard to the inflation rate which is the nominal anchor."
(a) Describe the basic features of inflation targeting.
(b) Discuss and describe the implications of this regime for emerging countries like Mauritius.
prepare detailed notes on any Two of following:
(a) The equity price channel for transmission of monetary policy.
(b) The credit view.
(c) The causes and persistence of inflation.
(d) Friedman modern quantity theory and its empirical validity.