Fiscal and Monetary Policy Essay Example
CENTRAL INSTITUTE FOR ECONOMIC MANAGEMENT CENTER FOR INFORMATION AND DOCUMENTATION ------------------------------------------------FISCAL AND MONETARY POLICY FOR STABLIZING MACRO-ECONOMY AND STRENGTHENING THE ECONOMIC GROWTH IN VIETNAM (SUMMARY)*
Fiscal and monetary policy are two important tools in managing and adjusting the macroeconomy. They have different purposes. Fiscal policy refers to the revenues of state budget, financial funds and the expenditure undertaken by the government annually. The expenditure includes regular expenditure, development investment, supplement for national reserves, payment of internal and external debts. Monetary policy is one of the tools used by a central bank to control the money supply and money circulation in order to attain the objectives of macroeconomic policy. Sometimes, the fiscal policy implementation may badly affect the monetary policy implementation, and vice versa. The inconsistent coordination between fiscal and monetary policy during implementing will cause contradictions, breaking the market rule and negatively affecting the sustainable growth. Therefore, in the short-term, these two policies should be coordinated to achieve objectives of each policy orderly. In the longterm, they should be combined together to ensure the balance their objectives, accompanied with the sustainable economic growth and inflation restraint. In detailed, if the fiscal policy implementation is considered and timely coordinated with monetary policy, the attained objectives of fiscal policy will be acted as “buffer step” for implementing monetary policy. With the purposes of increasing budget revenues, reducing regular expenditure, controlling basic construction investment, etc. fiscal policy aims at balancing the state budget revenue and expenditure and then stablizing monetary, controlling inflation and deflation in the short-term and long-term. Similarly, the close coordination with fiscal policy when implementing monetary policy
Fiscal and monetary policy are two important tools in managing and adjusting the macroeconomy. They have different purposes. Fiscal policy refers to the revenues of state budget, financial funds and the expenditure undertaken by the government annually. The expenditure includes regular expenditure, development investment, supplement for national reserves, payment of internal and external debts. Monetary policy is one of the tools used by a central bank to control the money supply and money circulation in order to attain the objectives of macroeconomic policy. Sometimes, the fiscal policy implementation may badly affect the monetary policy implementation, and vice versa. The inconsistent coordination between fiscal and monetary policy during implementing will cause contradictions, breaking the market rule and negatively affecting the sustainable growth. Therefore, in the short-term, these two policies should be coordinated to achieve objectives of each policy orderly. In the longterm, they should be combined together to ensure the balance their objectives, accompanied with the sustainable economic growth and inflation restraint. In detailed, if the fiscal policy implementation is considered and timely coordinated with monetary policy, the attained objectives of fiscal policy will be acted as “buffer step” for implementing monetary policy. With the purposes of increasing budget revenues, reducing regular expenditure, controlling basic construction investment, etc. fiscal policy aims at balancing the state budget revenue and expenditure and then stablizing monetary, controlling inflation and deflation in the short-term and long-term. Similarly, the close coordination with fiscal policy when implementing monetary policy