"The Central bank has changed the emphasis of the monetary policy from meeting the medium-term targets of aggregates of money supply to monitoring daily changes in the liquidity position of the market." What are the targ

Once the goals of monetary policy have been decided, the next step is implementation. Whatever the goal, implementation means easing or tightening as the circumstances warrant. We can specify the degree of easing or tightening in terms of its effects. Target of monetary policy is an economic variable whose desired value is used to define the stance of a monetary policy. The target can be stated in terms of any one of the effects of an easing or tightening - money growth, the interest rate, or the exchange rate. A Money - Growth Target: Monetary policy can be defined in terms of a money-growth target. Depending on its goals, the Central Bank decides on the appropriate rate of growth of the quantity of money. It then increases reserves through open market operations at a rate that will achieve this target. To ease monetary policy, the Central Bank raises its target rate of growth. To tighten monetary policy, it lowers its target rate of growth. The reason for the change might be that the current policy is failing to achieve its desired goal; for example, inflation may be higher or lower than intended. Or the reason might be a change in goals: worries about inflation might give way to worries about unemployment. An Interest - Rate Target: Monetary policy can be defined instead in terms of an interest rate target. Depending on its goals, the Central Bank decides on the appropriate level of the interest rate. It then increases reserves through open market operations at a rate that will achieve this target. If the interest rate is above target, increasing the rate of growth of reserves will increase monetary growth and bring the interest rate down. If the interest rate is below target, reducing the rate of growth of reserves will decrease monetary growth and push the interest rate up. To ease monetary policy, it raises its target level of interest rate. An Exchange-Rate Target: Bank decides on the appropriate level of the exchange rate. It then increases reserves through open market operations at a rate that will achieve this target. If the exchange rate is above target, increasing the rate of growth of reserves will increase monetary growth, lower interest rates, and bring the exchange rate down. If the exchange rate is below target, reducing the rate of growth of reserves will decrease monetary growth, raise interest rates, and push the exchange rate up. To ease monetary policy, the Central Bank lowers its target level of exchange rate: it devalues the currency. To tighten monetary policy, the Central Bank raises its target level of exchange rate. It revalues the currency.