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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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Optimal monetary policy in IS-MR-PC model

I am trying to work out a formal solution for the central banks' problem in the slightly modified IS-MR-PC model (popularized by Carlin & Soskice (2015) and Carlin & Soskice (2023) textbooks). ...
Илья Гуленков's user avatar
-3 votes
1 answer
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What are the best criticisms of economies of scale? [duplicate]

What are the best criticisms of economies of scale—the notion that bigger, centralized industries are actually more efficient than smaller, decentralized ones? Which economists historically opposed ...
Geremia's user avatar
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How does China maintain the soft peg?

As a central bank, if you want to keep your currency low you can just keep buying foreign currencies (which is selling your own currency) to satisfy all the demand for your currency and prevent ...
Sea Erchin's user avatar
1 vote
1 answer
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Assessing the effectiveness of macroprudential liquidity requirements

I would like to investigate the effectiveness of Basel III Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) in containing systemic risk during crises. As far as I know, a few studies ...
Maurizio Marinaro's user avatar
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ON RRP Facility and Bank Reserve

The ON RRP is, to quote Fed of NY, "dropping like a stone". From a balance sheet perspective, i understand that MMF are pulling out their funds out of the RRP facility. Everything else equal,...
Stradam's user avatar
-4 votes
1 answer
242 views

Money creation - why do we need deposits and why do banks give out money? [duplicate]

Currently studying elementary economics but there's this one concept that I'm struggling to wrap my head around at the moment: money creation. The way I understand it, banks can create money "out ...
l337n00b's user avatar
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2 answers
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Good books on money creation and monetary theory?

I just finished reading "Where does money come from?" (Ryan-Collins) on how commercial banks create the bulk of the money supply, and I am still hungry for more material that will help me ...
dreamerboy's user avatar
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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.
Cel's user avatar
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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 ...
Jamie Smith's user avatar
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1 answer
68 views

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 ...
Five9's user avatar
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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 ...
Max's user avatar
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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 (...
Oalvinegro's user avatar
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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 ...
Man Dem's user avatar
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1 answer
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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 ...
robertspierre's user avatar
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19 views

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 ...
Matt Frank's user avatar
-1 votes
2 answers
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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 ...
troy beckett's user avatar
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71 views

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 ...
Solaxun's user avatar
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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?

0 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 ...
Aabid Karim's user avatar
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2 answers
63 views

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 ...
Grant Curell's user avatar
2 votes
0 answers
46 views

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 ...
Jenny110's user avatar
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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), ...
tvqt's user avatar
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1 answer
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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/...
M. Y. Zuo's user avatar
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2 answers
149 views

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 ...
troy beckett's user avatar
0 votes
1 answer
70 views

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 ("...
studentp's user avatar
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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 ...
troy beckett's user avatar
5 votes
1 answer
477 views

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) ...
BlankerHans's user avatar
2 votes
2 answers
225 views

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 ...
Adham's user avatar
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1 vote
1 answer
135 views

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 ...
Mick's user avatar
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1 vote
2 answers
76 views

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 ...
user43884's user avatar
2 votes
1 answer
72 views

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 ...
Grant Curell's user avatar
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66 views

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 ...
ayazasker's user avatar
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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 ...
against very long user names's user avatar
2 votes
1 answer
57 views

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&...
ras's user avatar
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5 votes
1 answer
97 views

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 ...
nigel222's user avatar
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1 vote
1 answer
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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 ...
Mick's user avatar
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1 vote
3 answers
213 views

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 ...
ayazasker's user avatar
0 votes
1 answer
43 views

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 ...
Daniel Muñoz's user avatar
-1 votes
2 answers
81 views

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 ...
Mick's user avatar
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0 votes
1 answer
132 views

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 ...
SPS's user avatar
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1 vote
1 answer
42 views

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 ...
Arash Howaida's user avatar
1 vote
2 answers
284 views

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 ...
Flux's user avatar
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1 vote
1 answer
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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 ...
Ben's user avatar
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0 votes
3 answers
95 views

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 ...
Mick's user avatar
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1 vote
1 answer
31 views

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 ...
kungfunomics's user avatar
1 vote
1 answer
50 views

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 ...
discipulus's user avatar
1 vote
1 answer
65 views

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 ...
driewguy's user avatar
0 votes
0 answers
60 views

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 ...
quant's user avatar
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1 vote
1 answer
31 views

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, ...
Arash Howaida's user avatar
2 votes
0 answers
45 views

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 ...
user93353's user avatar
2 votes
1 answer
94 views

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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