Diplomacy & Politics Glossary

Monetary actions aimed at stabilizing the economy by increasing money supply during recessions and decreasing it during booms.

A fixed exchange rate system where a country’s currency value is tied to another currency or basket of currencies.

The system a country uses to manage its currency in relation to other currencies, such as fixed, floating, or pegged.

The belief that controlling the money supply is the primary method to regulate economic activity and control inflation.

The percentage increase in the general price level of goods and services over a period, reducing purchasing power.

A situation where monetary policy becomes ineffective because interest rates are near zero and savings rates remain high, limiting economic stimulus through traditional channels.

The concept that changes in the money supply only affect nominal variables like prices, not real variables like output or employment, in the long run.

Central bank actions to offset the impact of foreign exchange interventions on the domestic money supply.

The process through which changes in monetary policy influence economic variables like inflation and output.

The process through which changes in monetary policy affect the economy, including interest rates, investment, and inflation.

Central bank actions to offset foreign exchange interventions to maintain monetary policy targets.

International reserve assets created by the IMF to supplement member countries’ official reserves and provide liquidity.