Monetary policy is primarily concerned with the management of interest rates and the total supply of money in circulation and is generally carried out by central banks such as the U. Fiscal policy is the collective term for the taxing and spending actions of governments. In the United States, the national fiscal policy is determined by the executive and legislative branches of the government. See Who sets fiscal policy, the president or congress?
Fiscal and Monetary Policy 1. Planned and implemented activities of the Government of RM in the reporting period 1. Fiscal Policy In the reporting period, the fiscal policy was directed towards realization of several previously planned activities, as well as undertaking measures which should have acted in the direction of gradual drawing of the national economy out of the recession phase.
They are mainly based on the following: As of 1 January,the contribution rate for pension insurance was cut from 19 to The aim of these measures is cutting down the financial burden of the business subjects and creating the possibility for giving financial means which will be used for stimulating production, thus increasing the number of the employees decreasing the number of unemployed ; c Realization of the planned dynamics for approving subsidies for certain agricultural products.
With the budget of RM forthey are planned to reach the amount of millions of euros. Their realization in the period of would mean completing the program-planned amount for granting subsidies in agriculture and thus its adaptation to the corresponding system of agricultural financing determined in the European Union.
In the Budget of RM forsubsidies of euros in denar equivalent value are planned for the tourist agencies that will bring a group of at least ten tourists from the neighbouring countries into the country and who will realize at least three overnight stays with breakfast n a categorized object; e According to the dynamics of harmonization of the national customs policy with that of the World Trade Organization, as of 1 Januarythe Government of RM adopted lower customs duties that are calculated when importing products tariff rates ; f In the function of enhancing the business climate in the country, as one of the substantial conditions for attracting national and foreign investments, the establishment of the real-estate cadastre continued in the reporting period.
In the end ofthat cadastre was established for the 96 percent of the real-estates in RM; Similarly as the previously mentioned measure, the Real Estate Cadastre Agency cut down the prices of its services in a range from 10 to 72 percent depending on the type of the service.
In addition, the prices for the physical and legal entities have been made equal, as well as the prices for entering the family apartment house a flat and office space into the cadastre registry and registering a mortgage. In the end, a system of premarking has been established which includes entering an apartment building in the cadastre while still in the construction phase, which prevents multiple sale of a same apartment.
Besides these program activities, in the analyzed period the Government of RM undertook other activities as well, which arose from the need for stimulation of the economy for drawing out of the recession and reinforcing the process of decentralization of the fiscal authority: That was a way to cover part of the budget deficit, but also more of a source of financial means for payment of the previously sold bonds together with the corresponding interest.
Due to that, the dynamics and level of sold state bonds were considerably lower than before. Besides that, the Government of RM realizing that it could have a great influence on the level of interest rates in the economy has started to gradually decrease the interest rate for the bonds it is selling.
At the end of Januarythe interest rate of the state bonds was 5 percent a year. Those activities should have double positive effect: Increasing the level of lending that banks approve for private entities and decreasing the corresponding interest rates that are alculated for the lending; b For the yearthe Government decided to increase the financial means for redistribution among municipalities, thus the lowest amount that a given municipality would receive from the redistribution of the means from the collected VAT during to equal 3 instead of 2 millions of denars that had been given until now.
This was done by changing the methodology for redistribution of the determined 3 percent from the VAT incomes among the municipalities.
This measure is expected to reach higher level of equation of the incomes of the municipalities, which shall be mostly beneficial for the smaller and less developed municipalities in RM; c In order to decrease the number of unproductive expenses, the Government of RM has decided in the course of not to realize the planned increase in the salaries of the public administration.
That measure is in function of the efforts to overcome the problems that the national economy is facing because of the still present world economic crisis. Monetary Policy The monetary policy in the reporting period was orientated towards keeping the stability of the exchange rate of the denar.
That kind of monetary policy had to ensure keeping prices stability as its basic, legally determined objective. Thus, NBRM kept restrictive monetary policy. Its main instruments were used in that function operations on the open market, interest rate and compulsory reserve.
By their use, NBRM kept the stability of the exchange rate of the denar. Moreover, in the function of protecting the exchange rate of the denar, the condition of the foreign xchange reserves of the country was significantly enhanced. However, the over-restrictiveness of the monetary policy caused the consumer prices through which the inflation rate can be measured to notice falling negative dimensions.
This means that the economy entered in a destructive zone of deflation. That condition was present in the period of June-December The rate of deflation equaled 0. The longer presence of deflation can be worse for the economy with an inflation rate of, for example, percent.
Realizing that, in December and in the beginning of JanuaryNBRM decreased the referent interest rate from 9 to 8. It can be noticed that with the decreased referent interest rate, the amount of entered treasury bills of NBRM in the reporting period noticed record dimensions exceeding the amount of millions of euros.
That had a great restrictive effect on the solvency of the banks, on the level of granted landings to the companies and the population, thus placing a negative effect on the level of interest rates when granting lendings to private entities.
Within the end of January They were additionally supported by credit financial means from commercial banks authorized to grant and serve those credits. What remains to be implemented not implemented yet or not yet finished in the analyzed period During the analyzed period a substantial part of the planned activities of the Government of RM were realized.
Besides them, the Government of RM undertook other activities that arose from the newly created recession conditions as a result of the effect of the world economic crisis. However, some of the planned program activities are still left to be fully realized.
They are particularly about continuing and completing the processes of denationalization of the property and the fiscal decentralization.
The dynamics of decentralization is done in a slower pace than before, which is a serious problem for the realization of the planned increase of investments national and foreign in the country, as well as the already started process of privatization of the land parcels used by a substantial part of the enterprises and the citizens.Monetary policy.
Monetary policy is the process by which the monetary authority of a country, like the central bank or currency board, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. Monetary Policy The monetary policy in the reporting period was orientated towards keeping the stability of the exchange rate of the denar.
That kind of monetary policy had to ensure keeping prices stability as its basic, legally determined objective. Thus, NBRM kept restrictive monetary policy. monetary policy interaction using the experience of the Czech Republic.
In the second chapter, we discuss the effects of fiscal policy on the transmission of monetary policy. The monetary policy decisions of the CNB Bank Board are based on the current macroeconomic forecast and an assessment of the risks to its fulfilment.
On the Czech Republic’s entry into the euro area, the CNB will cede independent monetary policy to the European Central Bank. Discusses the combination of monetary and fiscal policy in the Czech Republic. Application of the principle of effective market classification (EMC) to the economic conditions; Confirmation of the modification requirement of the EMC principle; Recommendations for the internal and external balance.
FISCAL POLICY FOR DEVELOPMENT IN THE DOMINICAN REPUBLIC FISCAL POLICY FOR DEVELOPMENT IN THE DOMINICAN REPUBLIC Please cite this publication as: OECD (), “Fiscal policy for development in the Dominican Republic”, Cyclical behaviour of fiscal policy in the Dominican Republic,