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Monetary policy
 

 

The deliberate control of the money supply and/or rates of interest by the central bank to try to effect a change in emplyment or inflation. Monetary policy, by controlling interest rates, can effect changes in the capital account of a country's balance of payments, since relatively higher rates of interest in one country will attract fonds from other countries in the short term. Monetary policy is one approach to stabilization policy.

Reference: The Penguin Dictionary of Economics, 3rd edt.