Académique Documents
Professionnel Documents
Culture Documents
4-2
Conduct
Conduct monetary
monetary policy
policy
Supervise
Supervise and
and regulate
regulate depository
depository
institutions
institutions
Maintain
Maintain financial
financial system
system stability
stability
Provide
Provide payment
payment and
and other
other financial
financial
services
services to
to the
the U.S.
U.S. government,
government, the
the
public,
public, FIs,
FIs, and
and foreign
foreign official
official
institutions
institutions
4-3
The
The monetary
monetarypolicy-making
policy-making body
bodyof
of the
the FRS
FRS
Policies
Policies seek
seekto
to promote
promote full
full employment,
employment,
economic
economic growth,
growth, price
price stability,
stability,and
and aa
sustainable
sustainable pattern
pattern of
of international
international trade
trade
4-6
set
setand
andchange
changethe
thediscount
discountrate
rate(must
(mustbe
beapproved
approvedby
bythe
theBoard
Board
of
ofGovernors)
Governors)
make
makediscount
discountwindow
windowloans
loanstotodepository
depositoryinstitutions
institutions
Supervise
Superviseand
andregulate
regulateFRS
FRSmember
memberbanks
banks
conduct
conductexaminations
examinationsand
andinspections
inspectionsof
ofmember
memberbanks
banks
issue
issuewarnings
warningswhen
whenbanking
bankingactivity
activityisisunsafe
unsafeor
orunsound
unsound
approve
approvebank
bankmergers
mergersand
andacquisitions
acquisitions
Provide
Providegovernment
governmentservices
services
act
actas
asthe
thecommercial
commercialbanks
banksof
ofthe
theU.S.
U.S.Treasury
Treasury
4-8
collect
collectand
andreplace
replacecurrency
currencyinincirculation
circulationas
asnecessary
necessary
Clear
Clearchecks
checks
act
actas
asaacentral
centralclearing
clearingsystem
systemfor
forU.S.
U.S.banks
banks
clear
clear~25%
~25%of
ofall
allchecks
checkswritten
writtenininthe
theU.S.
U.S.
Provide
Providewire
wiretransfer
transferservices
services
Fedwire
Fedwire
Automated
AutomatedClearinghouse
Clearinghouse(ACH)
(ACH)
Perform
Performbanking
bankingsector
sectorand
andeconomic
economicresearch
research
used
usedininthe
theformulation
formulationof
ofmonetary
monetarypolicy
policy
4-9
Major
Majorliabilities
liabilities
reserves
reserves
currency
currencyin
incirculation
circulation
currency
currencyin
incirculation
circulation++reserves
reserves==money
moneybase
base
4-10
4-11
Monetary Policy
Monetary
Monetary policy
policy affects
affects the
the
macroeconomy
macroeconomy by
by influencing
influencing the
the supply
supply
and
and demand
demand for
for excess
excess bank
bank reserves
reserves
influences
influences the
the money
money supply
supply and
and the
thelevel
level of
of
short-term
short-termand
and long-term
long-terminterest
interest rates
rates
affects
affects foreign
foreign exchange
exchange rates,
rates, the
the amount
amount of
of
money
money and
and credit
credit in
in the
the economy,
economy,and
and the
the
levels
levels of
ofunemployment,
unemployment, output,
output, and
and prices
prices
4-12
Monetary Policy
Open
Open market
market operations
operations
policy
policy directive
directive of
of the
the FOMC
FOMC isis forwarded
forwarded to
to
the
the Federal
Federal Reserve
Reserve Board
BoardTrading
Trading Desk
Desk at
at the
the
Federal
Federal Reserve
Reserve Bank
Bank of
ofNew
NewYork
York
Trading
Trading Desk
Desk manager
manager buys
buys or
or sells
sells U.S.
U.S.
Treasury
Treasury securities
securities in
in the
the over-the-counter
over-the-counter
(OTC)
(OTC) market,
market, which
which keeps
keeps the
the fed
fed funds
funds rate
rate
near
near its
its desired
desired target
target
4-13
Monetary Policy
Open
Open market
market operations
operations (contd)
(contd)
FRBNY
FRBNYacts
acts through
through the
theTrading
Trading Desk
Desk to
to
implement
implement policy
policy directives
directives each
each business
business day
day
operations
operations may
may be
be permanent
permanent or
or temporary
temporary
may
may use
use repurchase
repurchase agreements
agreements for
for temporary
temporary
increases
increases or
or decreases
decreases in
in excess
excess reserves
reserves
4-14
Monetary Policy
The
The discount
discount rate
rate isis the
the rate
rate Federal
Federal Reserve
Reserve
Banks
Banks charge
charge on
on loans
loans to
to depository
depository
institutions
institutions in
in their
theirdistrict
district
The
The Federal
Federal Reserve
Reserve rarely
rarelyuses
uses the
the discount
discount
rate
rateas
as aa policy
policy tool
tool
discount
discountrate
ratechanges
changesare
arestrong
strongsignals
signalsof
ofthe
theFederal
Federal
Reserves
Reservesintentions
intentions
there
thereisisno
noguarantee
guaranteethat
thatbanks
bankswill
willborrow
borrow
4-15
Monetary Policy
Reserve
Reserve requirements
requirements are
arethe
thereserve
reserveassets
assets
depository
depositoryinstitutions
institutions must
must keep
keepto
to back
back
transaction
transaction deposits
deposits
reserve
reserveassets
assetsinclude
includevault
vaultcash
cashand
anddeposits
depositsatat
Federal
FederalReserve
ReserveBanks
Banks
The
The multiplier
multipliereffect
effect
1
in reserves
new reserve requirement ratio
in money supply
4-16
Monetary Policy
Expansionary
Expansionary monetary
monetarypolicy
policy
open
openmarket
marketpurchases
purchasesof
ofsecurities
securitiesby
bythe
theFed
Fed
discount
discountrate
ratedecreases
decreases
reserve
reserverequirement
requirementratio
ratiodecreases
decreases
Contractionary
Contractionary monetary
monetary policy
policy
open
openmarket
marketsales
salesof
ofsecurities
securitiesby
bythe
theFed
Fed
discount
discountrate
rateincreases
increases
reserve
reserverequirement
requirementratio
ratioincreases
increases
4-17
i=8%
Interest
Rate
MS
MS
MS
iT = 6%
i*=6%
MD
MD
MD
i=4%
MS
Quantity of Money
4-18
i= 5%
MD
MD
MD
Quantity of Money
The
The European
European Central
Central Bank
Bank
recently
recentlyswitched
switchedfrom
fromtargeting
targetingthe
themoney
moneysupply
supplyto
to
targeting
targetinginflation
inflation
The
The Peoples
PeoplesBank
Bankof
of China
China
interest
interestrates
ratesare
arebecoming
becomingaamore
moreimportant
importantpolicy
policy
tool
toolas
asChina
Chinamoves
movesto
toaamarket
marketoriented
orientedfinancial
financial
system
system
4-20