Copyright © 2010 Pearson Education. All rights reserved. Chapter 16 Tools of Monetary Policy

Copyright © 2010 Pearson Education. All rights reserved Tools of Monetary Policy Open market operations ( 公開市場操作 ) –Affect the quantity of reserves and the monetary base Changes in borrowed reserves( 改變借入準備，又稱貼 現窗口政策 ) –Affect the monetary base Changes in reserve requirements ( 應提準備改變 ) –Affect the money multiplier Federal funds rate ( 聯邦基金市場利率 ): the interest rate on overnight loans of reserves from one bank to another –Primary instrument of monetary policy

Copyright © 2010 Pearson Education. All rights reserved Demand in the Market for Reserves ( 市場對準備金的需求 ) What happens to the quantity of reserves demanded by banks, holding everything else constant, as the federal funds rate changes( 聯 邦基金市場利率改變對準備金需求的影響 )? Excess reserves are insurance against deposit outflows –The cost of holding these is the interest rate that could have been earned minus the interest rate that is paid on these reserves, i er ( 持有超額準備的成 本是應賺而未能賺得的報酬率減超額準報酬率 )

Copyright © 2010 Pearson Education. All rights reserved Demand in the Market for Reserves Since the fall of 2008 the Fed has paid interest on reserves at a level that is set at a fixed amount below the federal funds rate target.( 自從 2008 年秋天 聯準會開始對準備金支付利息， 利率固定，略低於聯邦基金 利率 ) When the federal funds rate is above the rate paid on excess reserves, i er, as the federal funds rate decreases, the opportunity cost of holding excess reserves falls and the quantity of reserves demanded rises Downward sloping demand curve that becomes flat (infinitely elastic) at i er

Copyright © 2010 Pearson Education. All rights reserved Supply in the Market for Reserves Two components: non-borrowed and borrowed reserves ( 非借 入與借入準備 ) Cost of borrowing from the Fed is the discount rate ( 向 Fed 借 入資金的成本是貼現率 ) Borrowing from the Fed is a substitute for borrowing from other banks ( 向 Fed 借入可以向其他同業借入取代 ) If i ff < i d,,( 聯邦基金利率小於貼現窗口利率 ) then banks will not borrow from the Fed and borrowed reserves are zero The supply curve will be vertical( 即準備金決定於 Fed 與市場利率無關 ) As i ff rises above i d, banks will borrow more and more at i d, and re-lend at i ff The supply curve is horizontal (perfectly elastic) at i d ( 供給曲線 在貼現率上為水平線，彈性無窮大 )

Copyright © 2010 Pearson Education. All rights reserved FIGURE 1 Equilibrium in the Market for Reserves

Copyright © 2010 Pearson Education. All rights reserved Affecting the Federal Funds Rate ( 影響聯邦基金利率的因素 ) Effects of open an market operation depends on whether the supply curve initially intersects the demand curve in its downward sloped( 負斜率 ) section versus its flat( 水平 ) section. An open market purchase causes the federal funds rate to fall ( 公開市場買進 ( 供給 線右移會導致聯邦基金利率下跌 ); whereas an open market sale causes the federal funds rate to rise (when intersection occurs at the downward sloped section).

Copyright © 2010 Pearson Education. All rights reserved Affecting the Federal Funds Rate (cont’d) Open market operations have no effect on the federal funds rate when intersection occurs at the flat section of the demand curve.( 如果供需均衡點發生在需求線為水平階段， 公開市場操作沒有效果 ),

Copyright © 2010 Pearson Education. All rights reserved Affecting the Federal Funds Rate (cont’d) If the intersection of supply and demand occurs on the vertical section of the supply curve, a change in the discount rate will have no effect on the federal funds rate. ( 如果供需均衡點發生在供給線為垂 直階段, 改變貼現率不會對聯邦基金利率造成影響 ) If the intersection of supply and demand occurs on the horizontal section of the supply curve, a change in the discount rate shifts that portion of the supply curve and the federal funds rate may either rise or fall depending on the change in the discount rate( 如果供需均衡點發生在供給線為水平線時， 改變貼現率，若貼現率上升 ( 或下降 ) 會使得聯邦基金利率上 升 ( 下降 )

Copyright © 2010 Pearson Education. All rights reserved Affecting the Federal Funds Rate (cont’d) When the Fed raises reserve requirement, the federal funds rate rises ( 當 Fed 調升應提準 備比率 ( 需求曲線右移 ) ，會導致聯邦基金利率上升 ) and when the Fed decreases reserve requirement, the federal funds rate falls.

Copyright © 2010 Pearson Education. All rights reserved Figure 2 Response to an Open Market Operation

Copyright © 2010 Pearson Education. All rights reserved Figure 3 Response to a Change in the Discount Rate

Copyright © 2010 Pearson Education. All rights reserved Figure 4 Response to a Change in Required Reserves

Copyright © 2010 Pearson Education. All rights reserved Figure 5 Response to a Change in the Interest Rate on Reserves

Copyright © 2010 Pearson Education. All rights reserved Federal Funds Target Rate

Copyright © 2010 Pearson Education. All rights reserved Conventional Monetary Policy Tools( 傳統貨幣政策工具 ) During normal times, the Federal Reserve uses three tools of monetary policy—open market operations( 公開市場操作 ), discount lending( 貼現放款 ), and reserve requirements( 應提準備 )—to control the money supply and interest rates, and these are referred to as conventional monetary policy tools.

Copyright © 2010 Pearson Education. All rights reserved Open Market Operations Dynamic open market operations( 動態公開市 場操作 Defensive open market operations ( 防衛式公 開市場操作 ) Primary dealers ( 主要的交易商 ) TRAPS (Trading Room Automated Processing System) ( 交易室自動處理系統 ) Repurchase agreements ( 再購置協定 ) Matched sale-purchase agreements

Copyright © 2010 Pearson Education. All rights reserved Advantages of Open Market Operations The Fed has complete control over the volume (Fed 能夠完全掌控 ) Flexible and precise ( 伸縮性及精確性 ) Easily reversed ( 可逆性 ) Quickly implemented ( 迅速執行 )

Copyright © 2010 Pearson Education. All rights reserved Discount Policy Discount window ( 貼現窗口 ) Primary credit ( 主要信用 )— : standing lending facility –Lombard facility( 倫巴德機制 )( 凡在央行設有活期存款帳 戶之金融機構，均可以合格擔保品申貸，利率為重貼現率 ) Secondary credit ( 次級信用 ) Seasonal credit ( 季節性信用 ) Lender of last resort to prevent financial panics( 最後貸款者可預防金融風暴 ) –Creates moral hazard problem ( 但也可能製造更多的道 德危險問題 )

Copyright © 2010 Pearson Education. All rights reserved Advantages and Disadvantages of Discount Policy Used to perform role of lender of last resort( 通常扮演最後貸款者角色 ) –Important during the subprime financial crisis of Cannot be controlled by the Fed; the decision maker is the bank (Fed 無法掌控，而 決定於銀行 ) Discount facility is used as a backup facility to prevent the federal funds rate from rising too far above the target ( 貼現裝置通常是備而 不用 )

Copyright © 2010 Pearson Education. All rights reserved Reserve Requirements ( 應提準 備政策 ) Depository Institutions Deregulation( 自由化 ) and Monetary Control Act of 1980 sets the reserve requirement the same for all depository institutions 3% of the first $48.3 million of checkable deposits; 10% of checkable deposits over $48.3 million The Fed can vary the 10% requirement between 8% to 14%

Copyright © 2010 Pearson Education. All rights reserved Disadvantages of Reserve Requirements ( 應提準備政策的缺點 ) No longer binding for most banks ( 大多數銀行 不會將準備金正巧等於應提準備，所以效果大打折 扣 ) Can cause liquidity problems( 會導致流動性問 題 ) Increases uncertainty for banks ( 增加不確定性 )

Copyright © 2010 Pearson Education. All rights reserved Nonconventional Monetary Policy Tools( 非傳統貨幣政策工具 ) During the Global Financial Crisis Liquidity provision( 流動性提供 ): The Federal Reserve implemented unprecedented increases in its lending facilities to provide liquidity to the financial markets –Discount Window Expansion( 擴大貼現窗口 )- 降低貼現率 –Term Auction Facility ( 定期競標融通機制 )- 貼現放款利率由競標決定 –New Lending Programs ( 新的融通計畫 )-Fed 放款給投行進行併購 Asset Purchases ( 資產收購 ): During the crisis the Fed started two new asset purchase programs to lower interest rates for particular types of credit: Government Sponsored Entities Purchase Program( 收購那些 Fannie Mae and Freddie Mac 保證之 MBS); QE2(quantitative easing 2) 收購長期政府公債。 --ref. p

Copyright © 2010 Pearson Education. All rights reserved Monetary Policy Tools of the European Central Bank( 歐洲央行 ) Open market operations( 公開市場操作 ) –Main refinancing operations( 主要的再融資操作 ) Weekly reverse transactions(2 個星期反向交易如同 repo 交易 ) –Longer-term refinancing operations ( 長期的再融資操作 )( 在公 開市場買進或賣出債券 ) Lending to banks –Marginal lending facility/marginal lending rate( 邊際貸款機制 (overnight loan)/ 邊際貸款利率 (100bp above the target financing rate))( 等於最高貸款利率 ) –Deposit facility( 接受存款利率以 100bp below the target financing rate)

Copyright © 2010 Pearson Education. All rights reserved Monetary Policy Tools of the European Central Bank (cont’d) Reserve Requirements( 應提準備 ) –2% of the total amount of checking deposits and other short-term deposits –Pays interest on those deposits so cost of complying( 遵法成 本 ) is low

Copyright © 2010 Pearson Education. All rights reserved 我中央銀行資產負債表

Copyright © 2010 Pearson Education. All rights reserved

Copyright © 2010 Pearson Education. All rights reserved 中央銀行貨幣政策工具

Copyright © 2010 Pearson Education. All rights reserved 中央銀行貨幣政策工具