tailieunhanh - Lecture Money and capital markets: Financial institutions and instruments in a global marketplace (8th edition): Chapter 14 - Peter S. Rose

Chapter 14 - The tools and goals of central bank monetary policy. After completing this unit, you should be able to understand how the policy tools available to central banks work in carrying out a nation’s money and credit policies; to explore the strengths and weaknesses of the various monetary policy tools. | Money and Capital Markets 14 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu The Tools and Goals of Central Bank Monetary Policy Learning Objectives To understand how the policy tools available to central banks work in carrying out a nation’s money and credit policies. To explore the strengths and weaknesses of the various monetary policy tools. To learn how the Federal Reserve System controls . credit and interest rate levels. To see how central bank policy actions affect a nation’s economic goals. Introduction Central banks are given the task of regulating the money and credit system in order to achieve the economic goals of full employment, a stable price level, sustainable economic growth, and a stable balance-of-payments position with the rest of the world. Although these objectives are not easy to achieve and often conflict, the central bank has powerful policy tools | Money and Capital Markets 14 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu The Tools and Goals of Central Bank Monetary Policy Learning Objectives To understand how the policy tools available to central banks work in carrying out a nation’s money and credit policies. To explore the strengths and weaknesses of the various monetary policy tools. To learn how the Federal Reserve System controls . credit and interest rate levels. To see how central bank policy actions affect a nation’s economic goals. Introduction Central banks are given the task of regulating the money and credit system in order to achieve the economic goals of full employment, a stable price level, sustainable economic growth, and a stable balance-of-payments position with the rest of the world. Although these objectives are not easy to achieve and often conflict, the central bank has powerful policy tools at its disposal. General versus Selective Credit Controls General credit controls affect the entire banking and financial system. Examples: reserve requirements, the discount rate, open market operations Selective credit controls affect specific groups or sectors of the financial system. Examples: moral suasion, margin requirements on the purchase of listed securities Reserve Requirements In the ., all depository financial institutions (including nonmembers) are required to conform to the deposit reserve requirements set by the Fed. Changes in reserve requirements are a very potent, though little-used tool. Indeed, reserve requirements have recently been reduced in the ., and eliminated in Canada, New Zealand, and the . Reserve Requirements Current Levels of Reserve Requirements for Depository Institutions in the . Source: Board of Governors of the Federal Reserve System, October 2001 Reserve Requirements An increase in deposit reserve requirements decreases the deposit .