Default Points5points State the main differences between tra

Default Points:5points) State the main differences between traditional and untraditional monetary policies in 200 word

Solution

An untraditional monetary policy is said to be employed by a central bank if a central bank buys other securities in the open market outside of government bonds, which is termed as quantitative easing. It also includes governments buying long-term bonds whereas selling off long-term debt so as to support influence the yield curve and governments intention to keep interest rates low for extended periods of time so as to increase consumer confidence. In untraditional monetary policy bank also use a negative interest rate policy.

                                                                              On the contrary, in traditional monetary policy central bank uses open market operations to buy and sell government securities, sets the overnight target interest rate and bank reserve requirements.