S/E/36. "Money Base control would seem to be easy and effective way of pursuing monetary policy". Explain this statement and discuss why it has never been used in any major economy.

Monetary base of the economy is usually taken as the stock of cash that an economy has i.e. the level of notes and coins. In money base control the central bank chooses the amount of money supply it is going to deliver to the banking system through its open market operations. It is one of the easiest ways of pursuing monetary policy. It is fast and highly effective but there is a question mark over its reliability whether it is applicable in real economy or not. This is the reason it has never been used in an economy. None of the central banks has ever used monetary base control as their weapon of monetary policy. As monetary writerities have to look at other factors like interest and exchange rates, it limits their control over the money base. There are numerous reasons which hinder the implementation of the money base control. This paper looks at the details of money base control and its limitations.