User:Nick Gardner /Sandbox: Difference between revisions

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<ref>[http://www.bankofengland.co.uk/monetarypolicy/framework.htm ''Monetary Policy Framework'', Bank of England, 2009]</ref>
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==Index and Glossary==
There is an index to the topics dealt with in the economics articles [[Economics/Related Articles|here]], and a glossary of economic terms [[Economics/Glossary|here]].


See also the  [[Politics/Index|'''index to the politics articles ''']].


The mechanism to move the market towards a 'target rate' (whichever specific rate is used) is generally to lend money or borrow money in theoretically unlimited quantities, until the targeted market rate is sufficiently close to the target. Central banks may do so by lending money to and borrowing money from (taking deposits from) a limited number of qualified banks, or by purchasing and selling bonds.
[[User:Nick_Gardner#Methodology|methodology]]


A typical central bank has several interest rates or monetary policy tools it can set to influence markets.
{|align="right" cellpadding="10" style="background-color:#FFFFCC; width:40%; border: 1px solid #aaa; margin:20px; font-size: 92%;"
|"''The European Union is something ...
very precious, not only for us in Europe, but also for the rest of the world. Because the European Union is, in fact, the result of a project for peace that brought together nations emerging from the ruins of the Second World War. It was the European Union that united them in peace around the values of respect for human dignity, freedom, democracy, justice, rule of law and respect for human rights.''"


    * Marginal lending rate (currently 1.75% in the Eurozone) – a fixed rate for institutions to borrow money from the central bank. (In the USA this is called the discount rate).
:Merci Olsson, of Nobel Med, congratulating  President Barroso on the award of The Nobel Peace Prize t the European Union, 12 October 2012.
    * Main refinancing rate (1.00% in the Eurozone) – the publicly visible interest rate the central bank announces. It is also known as minimum bid rate and serves as a bidding floor for refinancing loans. (In the USA this is called the federal funds rate).
|}
    * Deposit rate (0.25% in the Eurozone) – the rate parties receive for deposits at the central bank.
 
These rates directly affect the rates in the money market, the market for short term loans.
 
[edit] Open market operations
 
Open market operations
 
Through open market operations, a central bank influences the money supply in an economy directly. Each time it buys securities, exchanging money for the security, it raises the money supply. Conversely, selling of securities lowers the money supply. Buying of securities thus amounts to printing new money while lowering supply of the specific security.
 
The main open market operations are:
 
    * Temporary lending of money for collateral securities ("Reverse Operations" or "repurchase operations", otherwise known as the "repo" market). These operations are carried out on a regular basis, where fixed maturity loans (of 1 week and 1 month for the ECB) are auctioned off.
    * Buying or selling securities ("direct operations") on ad-hoc basis.
    * Foreign exchange operations such as forex swaps.
 
All of these interventions can also influence the foreign exchange market and thus the exchange rate. For example the People's Bank of China and the Bank of Japan have on occasion bought several hundred billions of U.S. Treasuries, presumably in order to stop the decline of the U.S. dollar versus the renminbi and the yen.
[edit] Capital requirements
 
<references/>

Latest revision as of 04:28, 22 November 2023


The account of this former contributor was not re-activated after the server upgrade of March 2022.


Index and Glossary

There is an index to the topics dealt with in the economics articles here, and a glossary of economic terms here.

See also the index to the politics articles .

methodology

"The European Union is something ... 
very precious, not only for us in Europe, but also for the rest of the world. Because the European Union is, in fact, the result of a project for peace that brought together nations emerging from the ruins of the Second World War. It was the European Union that united them in peace around the values of respect for human dignity, freedom, democracy, justice, rule of law and respect for human rights."
Merci Olsson, of Nobel Med, congratulating President Barroso on the award of The Nobel Peace Prize t the European Union, 12 October 2012.
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