ABSTRACT
Monetary and debt policy aims at influencing the economic activity of the community by acting on the quantity and composition of money and assets. Indissolubly linked with this is the policy on interest rates. Monetary and debt analysis thus becomes an attempt to trace the impact on the economy of money, assets and interest rates. The monetary authorities are concerned with both the quantity of monetary assets and the composition of them. The monetary authorities can influence the structure of interest rates in the economy. These effects are fed back by the market and move other fixed-interest rates and perhaps equity rates in the same direction as the movement in government security rates. The monetary authorities, because of the size and importance of their operations, are not in a position to adopt a neutral policy, where they can leave market forces to determine interest rates and the size and composition of money and assets.
