In a graph of the market for bank reserves, show how the Federal Reserve limits deviations of the market federal funds rate from its interest rate target under the channel system. Next, show how the Open Market Trading Desk would implement a decision by the FOMC to raise the target federal funds rate. Assume that the Fed alters the discount and deposit rates to maintain fixed spreads between them and the target federal funds rate.
Answer to relevant QuestionsFrom 1979 to 1982, the FOMC used money growth as an intermediate target. To do so, the committee instructed the Open Market Trading Desk to target the level of reserves in the banking system. What was the justification for ...Use the following Taylor rule to calculate what would happen to the real interest rate if actual and expected inflation increased by 3 percentage points. Target federal funds rate = 2 + current inflation + ½(inflation gap) ...Outline and compare the ways in which the Federal Reserve and the ECB added to or adjusted their monetary policy tools in response to the financial crisis of 2007-2009 and subsequent financial crisis in the euro area. In 2002, the Federal Reserve began to set the discount rate above the federal funds rate, reversing its previous practice of keeping the discount rate below the funds rate. To assess the impact, plot on a monthly basis from ...Show the impact on the Federal Reserve’s balance sheet of a foreign-exchange market intervention where the Fed sells $1,000 worth of foreign exchange reserves. Explain what impact, if any, the intervention will have on the ...
Post your question