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Essay example - Conduct of Monetary Policy in Kuwait

High school
Pages 2 (502 words)
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Monetary policy has become a primary tool which is utilized by nations in order to correct the imbalances existing within the economy (Monetary Policy 2). This stabilization policy is often carried out by a country's Central Bank. In the case of Kuwait, the CBK (Central Bank of Kuwait) is tasked to draw and implement appropriate monetary policy while also overseeing the health and well-being of the nation's local banking and financial unit system.

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In order to accomplish these broad goals, CBK has been adept in controlling the level of the domestic money supply and different interest rates. During the fiscal year 2005-2006, the broad definition of money supply or M2 amounts to KD14524.7 which represents a double digit increase of 17.2% from its previous level. This growth represents the ballooning of both quasi-money (18.6%) and narrow money (13.5%). The increase in money supply is attributed to the increase in both CBK's net foreign assets by 31.1% and the net foreign assets of local banks by 14.4% (Annual Report 2005-06 15).
The strict monitoring of interest rates is primarily attributed to CBK's efforts in "ensuring their consistency with the domestic economic and monetary developments (Annual Report 2005-06 16)" and "their alignment with trends in major currencies (Annual Report 2005-06 16)." In general, this is to enhance the competitiveness and attractiveness of Kuwaiti dinar relative to foreign currencies. ...
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