Questions tagged [central-banking]
In reference to activities undertaken by the central bank mainly to influence nominal interest rates, money supply and, eventually, price levels.
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Source of Fed Speeches Portal
Does anyone know of a website that contains all the text speeches of all the FOMC members and regional Federal Reserve Bank Presidents going back to a few decades, for example the 1970s.
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Monetary policy: could there by alternative outcomes?
Firstly, I understand the standard analysis of how a central bank attempts to modulate credit conditions in the economy (and therefore money supply) to dampen demand to prevent excess price level ...
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Does monetary policy render mathematical models for short-rates nearly useless?
Note: please do note that I am a tech person with no economics background.
I've been studying short-rate models so much for interview purposes and finally took a step out of the weeds to think about ...
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Can a Federal District Bank be negative in SOMA shares after interdistrict settlement?
I looked at publications examining whether the FED interdistrict settlement could apply to the Target-2 system. While most of my questions were answered, I am still left with one big issue I could not ...
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Which are the main non-private organizations to do research in economics outside of academia?
For students who are graduating in economics and like doing research, but do not want to stay in academia, are there any options besides my list?
My list so far:
Central Banks
OECD
World Bank
IMF (...
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How is the PBOC exchange reference rate set in China?
For instance, say the PBOC decides that they will set the rate at $1=7CNY. Is it just an announcement by the PBOC whereby now all Chinese banks/financial institutions have to follow this fixed ...
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Why people buy foreign bonds when foreign interest rate raises?
I'm reading Investopedia's How National Interest Rates Affect Currency Values and Exchange Rates to understand how interest rates affect exchange rates.
It says:
Generally, higher interest rates ...
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Did countries ever default against Federal Reserve's swap line?
Did foreign countries ever default against Fed's swap line or Foreign and International Monetary Authorities ? Or is it technically possible? I guess they will lose their collateral, and it's a big ...
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Why did the Bank of England cut the base rate so low in 2009? And what didn't happen that made them keep it low until 2020?
I'm aware there was a financial crisis in 2008 and because of that crisis the BoE cut the base rate to very low. For example in 2008 the base rate was 5%, but by 2009 it was 0.5%.
But why did the BoE ...
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What does a Denovo bank balance sheet look like on Day 1?
New banks require capital of $32M before starting operations. On Day 1, what does it's balance sheet look like? Before the bank makes a loan, it needs reserves to settle the transaction. Are those ...
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Which economic model and variables should I use to investigate the impact of sentimental shocks in central bank statements on investment?
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I am currently working on a research project that aims to investigate the impact of sentimental shocks in central bank statements on investment in the economy. I am looking for guidance on selecting ...
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Why would the fed impose larger cash requirements on banks if they’re already struggling to compete?
I was reading about the fed’s new regulatory efforts to further increase bank’s cash holding requirements. However, they’re doing this at the same time banks are facing more competition and draining ...
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Taylor rule and central bank preferences
When the central bank has output stability preferences, it is true that Taylor's rule (TR) is suboptimal compared to optimal monetary policy (MPR) if an inflationary shock occurs.
But when the central ...
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If interest rate policy were to disappear tomorrow, how would we/could we manage inflation?
Inflation has obviously become a big issue over the last couple of years again, and I've read people complaining that the inflation comes from increased prices of energy imports, (namely oil and gas), ...
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Why are subscriptions to the World Bank's IBRD measured in 1944 US dollars? How is this calculated?
Several official documents published by the World Bank's 'International Bank For Reconstruction and Development' (IBRD), such as https://pubdocs.worldbank.org/en/795101541106471736/...
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How can banks increase their central bank reserves?
Is it possible for a commercial bank to independently increase their central banks reserves? If yes, how would they do it?
To be clear, when I say independently, I mean a bank would like to increase ...
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Why limit the maximum size of deposit-CBDC transfers?
From page 33 of Dirk Niepelt's Money and Banking with Reserves and CBDC (October 2022):
Some central banks consider caps on CBDC balances to limit the maximum size of deposit-CBDC transfers ("...
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What process does a new bank go through to get its first central bank reserves?
Im trying to better understand how banks work and one of the first thing that confuses me is central bank reserves.
Current understanding of central bank reserves:
Central bank reserves never enter ...
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The paradox of IOU
If money is just an IOU then the initial creation of money contradicts this assumption, doesn't it?
A central bank doesn't owe money to any other entity (national central banks or commercial banks) ...
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What's wrong with a deflationary economy?
It is my understanding that central banks around the world strive to achieve a stable inflation rate of around 2%. It is claimed that this is because steady low inflation helps contribute to the ...
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What happens to the money supply when a bank is allowed to go bust
I'd like to ask this question in two different ways just to help clarify the issues.
Scenario 1. There is no deposit insurance and the central bank take no special action in response to the bank ...
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Why do sticky prices make output partly determined by demand?
First time going through the basic new-keynesian model and i understand the math behind it okay. I also get that output being partly demand determined is the transmission mechanism for monetary policy ...
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Are bailouts destabilizing the global economy?
I saw this posited in this WSJ opinion piece here
Notes on the Fed
In 1998, engineering a \$3.6 billion rescue of the giant hedge fund Long-Term Capital Management.
In 2001, slashing interest rates ...
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Federal Funds Rate & Reserves Market Contradiction
Edit: I do understand this isn't how things work anymore, since we are in a "Ample-Reserves Framework" and the quantity of reserves no longer makes a difference that much and it is primarily ...
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What kind of loans was Credit Suisse given by the Swiss central bank, recently?
Credit Suisse was recently extended \$54-cum-\$108 billion loans from the Swiss central bank, even as its takeover by UBS was announced (partly covered by taxpayers).
I'm slightly more familiar with ...
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How would a Central Bank Digital Currency be different from a private bank deposit?
Both are digital, both can be transferred digital, and both are denominated in the same currency. A CBDC is "a direct liability of the central bank, rather than of private banks or coin issuers&...
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Bank runs, deposit guarantees, and moral hazard
I understand the concept of moral hazard. If a government guaranteed all bank deposits 100%, bank customers would simply go to the bank with the highest interest rates and rely on the guarantee that ...
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What aspects of Money Creation in the Modern Economy are no longer correct
It has been suggested in some comments of another question that the well known paper Money Creation in the Modern Economy is no longer fully correct. What aspects of the paper would need to be ...
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Money Creation Confusion
I've been studying money creation recently and have come across some contradictory statements and different types of theories that I'd like to clear up.
The classical theory of money creation which ...
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What would happend if the total quantity of money get fixed?
I was wondering what would happend if the total amount of money get fixed in an scenario were there is not exchange of good and services between countries markets. I think maybe the fact that prices ...
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What have banks mostly done with their "excess reserves" obtained during QE
I put excess reserves in quotes because I know that in many countries there are no reserve requirements, so what I really mean by "excess reserves" is reserves in excess of what banks like ...
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Central bank balance sheets and money supply balances
I've compared the central bank balance sheets of many countries and I've found some numbers strange for me. The balance sheet of a central bank should include all the assets on one side and all the ...
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At what point would negative accounting equity for a central bank have macroprudential implications?
The yardstick for central bank "health" and/or "credibility" can be nebulous at times. It is sometimes argued that a balance-sheet assessment only does not capture the nuance of a ...
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How does the central bank reduce money supply by selling bonds if the buyer of the bonds can use bonds as currency?
When the central bank wants to reduce the money supply, it can sell bonds. That way, the money supply reduces by the amount paid for the bonds. The buyer will have bonds instead of cash. The bonds can ...
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How do higher debt-servicing costs cause financial crises?
I want to understand the context of an article (Economist, Finance and Economics section, Oct 28th, 2022)
Bruno Le Maire, France's finance minister:
"Money is no longer interest-free in the new ...
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Why do central banks feel the need to do something about the current inflation levels
We hear in so many places that the current high levels of inflation are mainly due to supply side problems, like the war in Ukraine. Given that there is currently less supply then we are all ...
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How is commercial bank reserve requirement enforced
More specifically:
What can be accounted as reserve (apart from actual reserve balance at a regional central bank) ?
how/where do banks file their reserve amount?
who verifies whether this informed ...
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Why the increase in bank loans is not reflected in increasing money supply?
In the US banking system, according to what I was able to understand, the way to increase the money supply (MS) is via commercial banks loans ( I suppose it includes loans to the government but in any ...
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Why do central banks want to decrease inflation?
Inflation is a result of increased demand with same supply (in worst case. in best case, supply also increases), due to more money on people's hand. As far as I understand it, inflated market is still ...
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Why don't central banks regulate inflation by stimulating supply, rather than arresting demand?
During an inflation spiral central banks will reduce the demand for goods by increasing the cost of money, thereby halting inflation but negatively impacting growth.
Rather than putting a brake on ...
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UK gilt yield melt up - fiscal dominance - preferences versus constraints
In 1962, Milton Friedman dismissed the notion of "central bank independence" as a polite fiction, saying "it would not survive the first real conflict with government." Since then, ...
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When the country's currency is falling, does it make sense for Central Bank to intervene beyond curbing Volatity?
Consider a country who have more imports than exports. If the country's currency is falling badly with reference to the dollar (and the dollar is the main trading currency for the said country), then ...
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Who insures the FDIC in case it fails?
I understand that the Federal Deposit Insurance Corporation (FDIC) failing is unlikely, but the probability of such a failure is still positive. In case the FDIC fails, who covers the customers' ...
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Why doesn't conventional monetary policy involve long-term interest rate targets?
Another way to phrase my question: why doesn't conventional monetary policy include manipulation of long-term interest rates?
This question might sound "weird" at first glance, but please ...
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Does having a dual mandate erode central bank independence?
To begin with, CB (central bank) independence is defined as not being subject to government influence.
If CB only cares about inflation, it is easy to be independent.
If CB also needs to guarantee ...
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New financing instruments as covert leverage?
Back when the Federal Reserve intervened in the commercial paper market in the 1970s, corporates essentially woke up the next morning and found they had two back-stopped modes of financing: their own ...
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Lender-of-last-resort institutional setup - are there trade offs?
In one of his papers, Minsky admonished the fragmented institutional set up that the US market has been using post-depression:
If the lender-of-Iast-resort function is decentralized so that
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How is a central bank able to control currency supply in an economy which has other banks and non-physical currency?
As I understand, in most economies, the central bank is supposed to be in charge of monetary policy, which in part means that they are supposed to be the only authority which can increase the amount ...
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Money Creation in the Modern Economy [closed]
I've been reading through this paper and found it fascinating, but have a few lingering questions which I can't quite reconcile.
The paper really stresses the point that banks are not reserve ...
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Loans create deposits, banks "are not reserve constrained"?
It is often said that banks are not "reserve constrained" when it comes to lending, and that loans create deposits (and therefore commercial banks create money). I have some doubts about the ...
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