Lecture 9: Structure and function of Central bank (Federal reserve)

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Presentation transcript:

Lecture 9: Structure and function of Central bank (Federal reserve) The lecture’s aim is to make the students understand how the Federal reserve is formed and structured. Monetary tools and policies that used by the Federal reserve to affect the money supply. 2 types of central bank: dependence and independence.

9.1 Structure of Federal reserve Location of 12 Federal reserve banks Board of governors, financial advisers. Federal open market committee

9.1 (cont) Question: What do you know about Federal reserve chairman? How long can Fed chairman serve in his term? http://www.youtube.com/watch?v=2XcCb1G8hC8 (Bernanke)

9.2 Monetary tools used by Fed reserve. Location of 12 Federal reserve banks Board of governors, financial advisers. Federal open market committee Review and decide suggest decide decide Reserve requirement Discount rate Open market operation

9.3 Types of the central bank Dependent central banks? Independent central banks? What kind of central bank is Fed, dependent or independent? The answers for the first 2 questions depend on weather or not the central banks are independent to make its goals and independent in using monetary policies and tools.

9.4 Independent status of other central banks

9.4 (example) http://www.youtube.com/watch?v=7iPaiylUYW0 (how the UK government make decision on monetary policy and its tools.)

9.5 Advantages and disadvantages of independent central banks. Have a long term goals and objectives Less be affected or influenced by politicians or president Disadvantages responsibility of Fed chairman become too big. May not be able to coordinate monetary policy with fiscal policy.

9.6 Do you support an independent or dependent central banks?