– Writer Professor Shatrughan Shrestha
Monetary Policy and Fiscal Policy are the two main tools that help policy makers manage or stimulate the economy.
Monetary Policy is Primarily concerned with the management of interest rates and the total supply of money in circulation usually controlled by a central bank. Central banks use tools such as open market operations, reserves requirements and discount rates to influence economic activities. They stimulate economic activities by encouraging borrowing and spending of curb inflation by limiting spending and encouraging saving.
Whereas, Fiscal Policy refers to tax and spending decisions made by the government to affect the economy. Governments use tax and spending policies to regulate economic activities with tools such as changes in government spending and tax collections aiming to increase GDP (Gross Domestic Product) कूल ग्राहस्थ उत्पादन ।
Through expansionary tools such as increased government spending or reduced economy activity through contractionary measures. Fiscal Policy Measures by the ministry of finance (MoF). Hence, Monetary Policy is carried out by central Banks while fiscal policy is entirely the responsibility of the government.
Fiscal policy generally has a greater impact on consumers than monetary policy affecting factors such as employment and income. Both policies work best when implemented together because they have direct and indirect impacts on the economy.