UNIVERSIDAD AUTÓNOMA DE NUEVO LEÓN

FACULTAD DE CONTADURIA PUBLICA Y

ADMINISTRACION

UNIDAD DE APRENDIZAJE: MACROECONOMIA

TEMA: Ensayo sobre el uso del modelo económico que analiza los efectos de la política monetaria y del
sistema financiero

NOMBRE DEL MAESTRO: HERNAN GONZALEZ MARIN

NOMBRE DEL ALUMNO: LEONARDO MAYA LOZANO 2055846

MANUEL ALEJANDRO PENA MATA 2048635
JAVIER AXEL MOLINA CASTILLO 2025631
CARLOS PATRICIO FLORES GARZA 2049936
ISRAEL AUGUSTO GARZA MENDEZ 2063635
EDGAR EMILIO ESCAMILLA FRIAS 2049035
GUILLERMO ANTONIO RIVERA GARCIA 2043271

GRUPO:2CI

FECHA: 3/8/23
MONETARY POLICY
Monetary policy is the discipline of economic policy that controls monetary factors
to ensure price stability and economic growth. It brings together all the actions
available to the monetary authorities (central banks) to adjust the money market.

Monetary policy is applied via the monetary system. It is generally applied by the
Superintendency of Banks and applied via the Central Bank. The financial system
is made up of the entire banking system, all the financial intermediaries of the
economy, directed by the Superintendency of Banks.
The tool that the bank of Mexico uses to avoid deviating from its inflation goal is the
target interest rate, also known as the overnight interbank interest rate, and it is the
rate announced by the Bank in its monetary policy decisions.

The intervention interest rate, open market operations, permanent facilities or

minimum reserves are some of the instruments of monetary policy to meet its main
objective: price stability. To understand its relevance and the impact it generates
on the real economy, we analyze the concept of monetary policy and the main
tools available to carry it out. It is known as intervention because it is the rate at
which the central bank directly intervenes in the money market to supply or extract
liquidity from the system; reference because it is used to calculate other interest
rates, and monetary policy because with it the monetary authority defines its policy
stance to drive inflation to its target. Open market operations are all purchase-sale
operations carried out by the Central Bank.
Permanent facilities are monetary policy instruments that allow liquidity to be
increased or withdrawn from the financial system within one day. They are used at
the request of the counterparties.

Minimum reserves are deposits that counterparties must mandatorily maintain with
national central banks. They are a monetary policy instrument that affects the
structural liquidity needs of the market and makes it possible to stabilize short-term
interest rates.
 As we can see in this example, the effect
of monetary policy affects interest rates,
This is an example of a graphic from 1945
from 2000 given by the Banco de Mexico

Interest rate policy

This tool involves the central bank adjusting interest rates to control the cost of
money and stimulate or discourage investment and consumption, when the central
bank lowers interest rates, this reduces the cost of credit, which in turn can
stimulate investment and consumption, on the other hand, when the central bank
raises interest rates, this increases the cost of credit, which may discourage
investment and consumption.

Open market operations

This tool involves the central bank buying or selling government bonds to influence
the money supply and interest rate. when the central bank buys bonds, it injects
money into the economy, which can stimulate aggregate demand and lower the
interest rate, on the other hand, when the central bank sells bonds, it withdraws
money from the economy, which can reduce aggregate demand and increase the
interest rate.

Reserve requirements:
This tool implies that the central bank establishes reserve requirements that
commercial banks must maintain to ensure financial stability and control the money
supply, when the central bank increases reserve requirements, commercial banks
have to hold more cash, which reduces the money supply and may increase
interest rates, on the other hand, when the central bank reduces reserve
requirements, commercial banks have more money available to lend, which
increases the money supply and may reduce interest rates.

Exchange rate:
This tool implies that the central bank can intervene in the foreign exchange market
to influence the exchange rate of domestic and foreign currencies. If the central
bank wants to reduce the value of its domestic currency, it can sell its own
currency and buy foreign currency in the foreign exchange market. If the central
bank wants to increase the value of its domestic currency, it can buy its own
currency and sell foreign currency in the foreign exchange market.

Communication and credibility

This tool imply that effective central bank communication can affect the confidence
and expectations of economic agents, which can affect the effectiveness of other
monetary policy tools, if the central bank effectively communicates its monetary
policy objectives and its commitment to achieving them, this can increase
economic agents' confidence in the economy and increase the effectiveness of
other monetary policy tools.

Innovation and experimentation

This tool imply that central banks can explore new monetary policy tools and
techniques to address emerging economic challenges, such as the global financial
crisis and the COVID-19 pandemic, for example, some central banks have
implemented negative interest rate policies, where commercial banks must pay to
keep their money at the central bank.
ETHICAL DILEMMAS ABOUT MONETARY POLICY

1.Ethical dilemma: What should a central bank do if its monetary policy is causing
an increase in the cost of living for the population?
Monetary policy can be used by central banks to control inflation and maintain
economic stability. However, sometimes the measures taken to achieve these
objectives can have a negative impact on the population. For example, if a central
bank raises interest rates to combat inflation, this can increase borrowing costs
and slow economic growth, which can result in unemployment and other problems.

In this case, the ethical dilemma arises when the central bank is faced with the
question of whether it should continue with its current monetary policy, even
though it is causing economic hardship for the population. On the one hand, the
central bank could argue that its responsibility is to maintain long-term economic
stability, and that a temporary increase in the cost of living is necessary to achieve
that goal. On the other hand, the central bank could also argue that it has a social
responsibility to prevent the population from suffering economic hardship.

2.Ethical dilemma: Is it ethical for a central bank to implement monetary policies

that benefit a minority of the population to the detriment of the majority?
Monetary policy can affect different groups of the population differently. For
example, if a central bank lowers interest rates, this may benefit people who have
debts, but it may harm people who live on the income from their savings. In this
case, the ethical dilemma arises when the central bank is faced with the question
of whether it should implement monetary policies that benefit a minority of the
population to the detriment of the majority.

The central bank could argue that its responsibility is to maximize long-term
economic welfare and that monetary policies that benefit certain groups are
necessary to achieve that goal. On the other hand, the central bank could also
argue that it has a social responsibility to ensure that its policies benefit as many
people as possible and that it should seek a balance between different groups in
the population.

As a conclusion, in both cases the ethical dilemma relates to the central bank's
responsibility to make decisions that affect the economy and, by extension, the
population at large. As such, any decision made must balance the need to maintain
long-term economic stability with the social responsibility to ensure that monetary
policies benefit as many people as possible.

THE MODERN NATIONAL FINANCIAL SYSTEM

The modern national financial system is a complex network of institutions, markets

and regulations that work together to facilitate the transfer of funds between savers
and investors, its main components and how it works:

Financial Institutions: Financial institutions are entities that channel funds from
savers to borrowers. These institutions include commercial banks, credit unions,
insurance companies and mutual funds, each of which has its own set of products
and services that it offers to customers.

Financial markets: Financial markets are places where investors buy and sell
financial assets, such as stocks, bonds and derivatives, these markets include the
stock market, the foreign exchange market and the bond market, the prices of
financial assets in these markets are determined through supply and demand.

Financial regulations: The modern domestic financial system is regulated by a

series of laws and regulations that seek to ensure the safety and stability of the
system, these regulations are established by the government and regulatory
agencies, and cover issues such as consumer protection, fraud prevention and
supervision of financial institutions.
Monetary policy: Monetary policy is a tool used by the central bank to control the
money supply in the economy and maintain financial stability; the central bank sets
the benchmark interest rate and controls the money supply through the purchase
and sale of government bonds and other financial assets.

Financial technology: Financial technology, or "fintech," has had a significant

impact on the modern financial system; new technologies, such as mobile
payments and cryptocurrencies, have changed the way consumers interact with
the financial system and created new opportunities for financial firms.

In a nutshell and to conclude this, the functioning of the modern national financial
system is a complex process involving the interaction of many different parties,
financial institutions channel funds from savers to borrowers through financial
markets, while regulations and monetary policy seek to ensure the stability and
security of the system, financial technology continues to evolve and is changing the
way consumers interact with the financial system.

CENTRAL BANK, COMMERCIAL BANK AND NATIONAL STOCK MARKET

Applying this to our country, Banco de México, commercial banks, and the national
stock market are closely related to the country's monetary policy. Monetary policy
is a set of actions taken by Banco de México to influence the money supply and
interest rates to achieve economic goals, such as maintaining price stability and
fostering economic growth, the following will describe how these three elements
interact and their relationship with monetary policy in Mexico.

Banco de México is the country's central bank and has the role of regulating
monetary policy, one of its main functions is to set the country's benchmark interest
rates, which directly affect the cost of money in the market and investment in
Mexico, if Banco de México decides to reduce interest rates, commercial banks
can offer loans at a lower cost, which stimulates consumption and investment, on
the other hand, if the Bank of Mexico decides to increase interest rates,
commercial banks will reduce the supply of credit and this may slow economic
growth.

Commercial banks are financial intermediaries between savers and borrowers in

Mexico, commercial banks use savers' deposits to grant loans and earn interest,
Banco de México's monetary policy directly affects commercial banks in terms of
the supply of credit and the interest rates they can offer, if the Bank of Mexico
lowers interest rates, commercial banks can offer loans at a lower cost, which
increases the demand for credit and encourages investment, on the other hand, if
the Bank of Mexico increases interest rates, commercial banks will reduce the
supply of credit and borrowers will have to pay more interest on loans, which may
decrease consumption and investment in Mexico.

The national stock market is a place where the shares of publicly traded Mexican
companies are bought and sold, the price of shares is determined by supply and
demand in the market and may be influenced by the monetary policy of the Bank of
Mexico, of the Bank of Mexico lowers interest rates, investors may be more willing
to invest in the stock market, which increases the demand for shares and may
increase stock prices in Mexico, on the other hand, if the Bank of Mexico increases
interest rates, investors may reduce their investment in the stock market and
decrease stock prices.

In conclusion, monetary policy in Mexico is closely related to the Bank of Mexico,

commercial banks and the domestic stock market, Banco de México regulates
monetary policy through interest rates, which affects the supply of credit and
investment in Mexico, commercial banks are financial intermediaries that offer
loans and earn interest, and their supply of credit and interest rates are directly
influenced by Banco de México's monetary policy.
National stock market reports typically include information on market trends such
as stock prices, trading volumes, and stock index movements. They can also
provide analysis of economic trends that may affect the stock market, as well as
information about publicly traded companies, their financial statements, and their
performance. In addition, these reports may include information on new stock and
bond issues and market movements from institutional and retail investors.