Monetary policy as a part of macroeconomic policy

Monetary policy is one integral part of macroeconomic policy, so that monetary policy is intended to support the macroeconomic objectives. The central bank has a monetary authority that regulates the circulation of money in the community and manage the allocation of money in circulation and affect the interest rate in order to achieve macroeconomic objectives as mentioned earlier, the high economic growth, equitable development, expansion of employment opportunities, equitable distribution income, price stability and balance of payments are more stable. These objectives sought to be achieved as far as possible the maximum and simultaneously.

There are several options or alternatives undertaken by the central bank in establishing monetary policy in order to achieve these objectives, namely:
1. choose the level of economic growth at the expense of the rate of inflation and balance of payments.
2. choose low inflation and balance of payments at the expense of economic growth and employment.
3. set all the targets to be achieved simultaneously, but none of the target can be achieved to the fullest.

Monetary policy can basically distinguish between monetary policy too loose (easy monetary policy) and the tight monetary policy (tight monetary policy). Loose monetary policy is generally taken to address the economic downturn in the country, with the addition of the amount of money in circulation, so that higher economic growth, but inflation can reduce the balance and balance of payments.
Tight monetary policy do to maintain price stability and to help the balance of payments by reducing the amount of money in circulation, but can reduce a country's economic growth.