Đang chuẩn bị liên kết để tải về tài liệu:
Lecture Financial institutions, markets, and money (9th Edition): Chapter 3 - Kidwell, Blackwell, Whidbee, Peterson

Chapter 3 - The fed and interest rates. The purpose of Chapter 3 is to explain how the Fed conducts monetary policy, which is the primary policy tool that the federal government uses to stabilize the economy over the business cycle. | Power Point Slides for: Financial Institutions, Markets, and Money, 9th Edition Authors: Kidwell, Blackwell, Whidbee & Peterson Prepared by: Babu G. Baradwaj, Towson University And Lanny R. Martindale, Texas A&M University CHAPTER 3 THE FED AND INTEREST RATES The monetary base comprises the Fed’s 2 largest liabilities: Federal Reserve Notes in circulation Depository institution reserves (reserve account balances and vault cash) The money supply involves the Monetary Aggregates The Fed controls the monetary base . To meet reserve requirements, depository institutions must transact with Fed in monetary base assets. They either - deposit adequate reserves at FRB or maintain adequate cash in vault Either way, reserves - required or excess - earn no interest. The more cash or reserves an institution holds above its requirements with the Fed, the more it wants to make new loans or investments to avoid lost interest income. Thus the Fed controls the money supply . Excess . | Power Point Slides for: Financial Institutions, Markets, and Money, 9th Edition Authors: Kidwell, Blackwell, Whidbee & Peterson Prepared by: Babu G. Baradwaj, Towson University And Lanny R. Martindale, Texas A&M University CHAPTER 3 THE FED AND INTEREST RATES The monetary base comprises the Fed’s 2 largest liabilities: Federal Reserve Notes in circulation Depository institution reserves (reserve account balances and vault cash) The money supply involves the Monetary Aggregates The Fed controls the monetary base . To meet reserve requirements, depository institutions must transact with Fed in monetary base assets. They either - deposit adequate reserves at FRB or maintain adequate cash in vault Either way, reserves - required or excess - earn no interest. The more cash or reserves an institution holds above its requirements with the Fed, the more it wants to make new loans or investments to avoid lost interest income. Thus the Fed controls the money supply . Excess reserves appear as Fed - buys securities on open market, lends at Discount Window, or lowers reserve requirements As depository institutions lend or invest excess reserves, M1 increases new loan of excess reserves increases borrower’s transactional balances purchase of investment securities increases seller’s transactional balances and the Money Supply affects the economy. Proceeds of new loans or investments not only increase M1 but finance purchases by DSUs of goods or services in real sector, contributing to economic growth. By expanding or contracting monetary base, Fed - increases or decreases excess reserves, thus raising or lowering incentive to lend or invest, thus encouraging or discouraging expansion in real sector. To influence interest rates, Fed targets but does not set Fed Funds Rate Fed Funds market is Fed-sponsored system in which depository institutions lend and borrow excess reserves among themselves Fed Funds Rate, set by market forces as institutions .