Analyze what a country must consider regarding the major issues of Essay

Analyze what a country must consider regarding the major issues of monetary and exchange rate policies - Essay Example The exchange rate policy of a country on the other hand works in synergy with the monetary policy as a means of effectively administering a variety and broad range of economic issues and policies. In general, it had been expressed that the exchange rate is a factor that enable and provide the monetary policy a basis to update and maintain rules and guidelines for economic engagements in the national and international arena (International Monetary Fund, 2004). Upon the determination of the main coverage of the concepts of the monetary and exchange rate policy, the main objective of determining the main issues targeted by the said policies is at hand. It can be considered that the policies related to the monetary and exchange rates of the country vary according to the respective economic capacity and standing. For that it is important to determine the issues, factors and concepts that a nation needs in relation to the said policies. In terms of the monetary policy of a nation, there are different categories of factors that affect the concept. These factors include inflation, economic output and employment with the concern on the effects of demand and supply of different goods which are defined and covered by the fiscal policy of a nation. These factors are monitored by a central body commonly referred to as the central bank of the country (Federal Reserve Bank of San Francisco, 2007). The different monetary frameworks deal with the different issues related to the enforcement of the monetary policies. One is the inflation targeting framework that is aimed to establish a clear communication of the possible inflation rates planned for a nation with accountability guidelines in terms of the central bank actions regarding inflation objectives. Another important issue is related to the interaction of the exchange rate policy to monetary policy by acting as an anchor and basis of the monetary rates.