tailieunhanh - Gerald Epstein Department of Economics and Political Economy Research Institute (PERI)

Three features taken together distinguish federal funds from other money market instruments. First, they are short-term borrowings of immediately available money—funds which can be transferred between depository institutions within a single business day. In 1991, nearly three-quarters of federal funds were overnight borrowings. The remainder were longer maturity borrowings known as term federal funds. Second, federal funds can be borrowed by only those depository institutions that are required by the Monetary Control Act of 1980 to hold reserves with Federal Reserve Banks. They are commercial banks, savings banks, savings and loan associations, and credit unions. Depository institutions are also the. | Version Financialization Rentier Interests and Central Bank Policy Gerald Epstein Department of Economics and Political Economy Research Institute PERI University of Massachusetts Amherst December 2001 this version June 2002 Paper prepared for PERI Conference on Financialization of the World Economy December 7-8 2001 University of Massachusetts Amherst. I thank Jim Crotty for many helpful suggestions Bob Pollin for very useful discussions on some of the material presented here Minsik Choi Dorothy Power and Max Maximov for excellent research assistance and the Ford and Rockefeller Foundations for essential financial support. All errors of course are mine and mine alone. Please send comments and suggestions to gepstein@ 1 Abstract Financialization refers to the increasing importance of financial markets financial motives financial institutions and financial elites in the operations of the economy and its governing institutions both at the national and international levels. This paper considers one aspect of financialization the increased use by central banks of inflation targeting . An extensive review of the literature shows that there is little evidence that inflation targeting reduces the costs of fighting inflation. Moreover I present new evidence that with respect to moderate rates of inflation - under 20 -- there are few macroeconomic costs of inflation. Hence central banks focus on inflation targeting cannot be explained by a rational social cost benefit calculation and therefore political economy analysis must be employed to explain its widespread use. The paper explores a contested terrain approach to understanding central banks preoccupation with inflation fighting an approach which concentrates on the relative interests of finance industry and labor with respect to macroeconomic policy. I suggest that in the case of the United States financialization during the 1990 s led to a closer alignment of large industrial and financial firms in .

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