FIM Theory Summary - Monetary Policy PDF
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This document summarizes monetary policy, focusing on the goals of central banks, and the operations like repurchase agreements and quantitative easing. It also describes the balance sheet structure of central banks.
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FIM THEORY SUMMARY Chapter 10: Monetary Policy Goals of Central Banks: 1. Price stability 2. Currency stability 3. Interest rate stabilit 4. Output stability 5. Economic growth 6. Low unemployment 7. Stability of the financial markets 8...
FIM THEORY SUMMARY Chapter 10: Monetary Policy Goals of Central Banks: 1. Price stability 2. Currency stability 3. Interest rate stabilit 4. Output stability 5. Economic growth 6. Low unemployment 7. Stability of the financial markets 8. Confidence 9. Lender of last resort What does the balance sheet of Central banks look like? ASSETS: government securiDes, discount loans LIABILITIES: currency in circulaDon Repo: Repurchase agreement: A repurchase agreement is an open market operaDon. It includes Central Banks creaDng opportunites for banks to borrow money. By means of a Repo a commercial bank can borrow money from Central banks on a regular basis. QuanDtaDve easing: QuanDtaDve easing on the other hand is a nonconvenDonal monetary policy tool. Central Banks “create” money not by using Repos but buy buying a lot of government bonds from the financial markets. Central banks should also prevent all bubbles that can be foreseen. This can someDmes be costly, or ineffecDve. ISCEB X STUDIST 34
