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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Money supply control vs. interest rate control

In a macroeconomics book I'm reading, the author talks about money supply control vs. interest rate control as two different approaches in monetary policy of a central bank. With the goal of price ...
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The independence of Central Banks [closed]

How do such digital currencies such as Bitcoin affect the independence of Central Banks? Thank you
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Limits to Quantitative Easing Programmes

I have been reading recently on the quantitative easing programmes by the ECB and the BOJ, see http://www.cnbc.com/2016/04/07/what-the-bank-of-japan-boj-will-do-now-that-negative-rates-have-...
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Why did the Fed raise interest rates between 2004 and 2006?

Between June 2004 and August 2006, the Fed raised interest rates again and again, because they were "...growing more uncomfortable about inflation". Looking at the graph below, inflation did increase,...
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Gold and loss of faith in central banking

In this article here, http://www.telegraph.co.uk/investing/gold/gold-resurgence-whos-buying-gold-and-why/ , it states that "gold tends to do....best when markets lose faith in central banking". I ...
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Why currency purchasing power is linked to confidence in central banks

From the New Statesman, http://www.newstatesman.com/politics/economy/2016/02/coming-storm, "Ever since the collapse of the Bretton Woods system of pegged exchange rates in 1971, the sole guarantee ...
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Why should I get a bond with negative interest instead of having a bank deposit account either zero interest or positive interest

I don't get why central banks apply negative interest rates. They say that buy our bond and at the maturity, it will worth less than today. What is the policy outcome of such decision? Why an investor ...
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Why hasn't Quantitative Easing surged inflation, or caused hyperinflation?

Quantitative Easing (QE) is the buying of bonds and other financial assets by the Central Bank with high-powered money, or money created by the CB for this purpose. Isn't this ad-hoc creation of ...
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How to make deliberate devaluation or depreciation of a currency?

It is said in Wikipedia, that devaluation can be done as monetary policy act. But HOW this can be done if there is no fixed rate? What are actual tools Central Bank can use? One thing I can imagine ...
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How much leverage has the Federal Reserve taken on today (Jan 2016)?

http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html?mid=twitter-share-di What makes you most nervous about the future? Debt. The idea that growth will ...
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Is the ECB a lender of last resort for european governments?

One of the usual functions of a Central Bank is to be the last resort of commercial banks, and governments. Does the ECB behave in this usual way toward European Governments? What about toward banks?...
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Why does a stronger currency have a tightening effect on economic conditions?

http://www.economist.com/blogs/buttonwood/2015/12/central-bank-predictability Ever since 1987, banks have been willing to cut rates when markets have wobbled. Driving down bond yields has been an ...
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What does a central bank guarantee against its currency?

During the Bretton Woods system, currencies were issued against gold. In contemporary times, what is the real thing against which currency is issued? What does the fiat currency actually guarantee?
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Is an increase in the money supply (by buying government bonds) recorded in bank deposits or bank reserves?

When the central bank pays 100 shekels for a bond held by the public, it is assumed that the 100 shekels are deposited. In this case, shouldn't it cause a 100 shekels increase in the bank deposit ...
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What happens to Fed's balance sheet when its asset shrink in value?

What happens to Fed's balance sheet when its asset shrink in value? I noticed that Fed's balance sheet is special because I do not see any O.E. category (correct me if I am wrong). Suppsoe Fed's ...
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Why didn't the money printing by the US Federal Reserve since 2008 lead to inflation?

http://www.telegraph.co.uk/finance/comment/liamhalligan/8484530/Americas-reckless-money-printing-could-put-the-world-back-into-crisis.html America's reckless money-printing could put the world back ...
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Fractional reserve banking and bank insolvency

I am trying to understand the fractional reserve banking system (with say 10 % reserve ratio). If a bank becomes insolvent because 100 % of the loans of a bank go bust, then who really becomes liable ...
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With inflation so low, why is it so hard to stimulate the economy?

Usually the limiting factor in stimulating an economy is how much inflation can a currency handle before the money being spent has a negative effect overall. But now we seem to have the opposite ...
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Does the Fed use misinformation as a tool for good monetary policy?

The Congress established the statutory objectives for monetary policy-- maximum employment, stable prices, and moderate long-term interest rates --in the Federal Reserve Act. http://www....
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Differing Inflation Rates for Separate Income Groups; Literature?

So here's a few ideas that have been floating around my head since undergraduate university. It seems that money owned by the highest net wealth owners is always moving around and making a return, but ...
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Federal Reserve capital injections

What were the specific conditions that the Federal Reserve attached to the capital injections forced upon the major Wall St. banks during the Great Recession? How and why do they differ from normally ...
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Federal Reserve conditions [duplicate]

Does the Federal Reserve have conditions attached to the money that's created and distributed to major banks?
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How is the interest on fractional reserve money creation paid?

In fractional reserve banking commercial banks create money when they make loans. When these loans are paid back the account is zeroed, the created money disappears, but the bank is still entitled ...
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Why are the 10 year German bunds and 10 year US treasury yield highly correlated?

And when the ECB started QE this year, the 10 year bunds rate naturally plummetted, but so did the 10 year US treasury rate. What fundamental reason could cause the US rate to drop in synchrony?
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Bank rate and Repo rate

Please explain the difference between Bank rate and Repo rate. Do the Bank and Repo rates affect each other?
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What would happen if central banks were no longer able to provide loans [closed]

Actually I'm asking because of two reasons. I'm still not clear how everything works. First money is supposedly a debt, and it is created by creating loans? Second central banks seem to want ...
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What prevents a bank from simply going into their computer system and adding some zeros to their bank account? [duplicate]

This question has been bothering me for a long time and I’m hoping that someone here can help to answer it. I will use Greece as an example, but my question could really be applied to any country or ...
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Can banks maintain Euro accounts if the country they're in leaves the eurozone?

If a country forcibly leaves the Eurozone, is it possible for banks within this country to maintain existing euro deposits? Or does leaving the eurozone mean those deposits are automatically ...
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Who regulates the balancing of the books for commercial banks? How? Is it public information?

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
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How is monetary policy fair in the current economy? [closed]

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
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How is monetary policy sustainable, or even fair, in the current economy? [closed]

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. I'm trying to wrap my head around this from multiple points of view, since it brings about a lot of ...
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Why does any treasury / central bank hold gold?

I know the US treasury is slowly selling its gold reserves, but what is the actual mission and purpose when it comes to the holdings? What is the reasoning behind the slow rate of liquidation? I have ...
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Is it possible to have a modern economy without a central bank?

Many mainstream economists say that such thing is impossible. Is there some specific reason why the financial system needs a central bank? In this video http://m.youtube.com/watch?v=BcuAOdXD0Go, ...
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What effect would raising reserve requirements while printing money have?

It is generally accepted, that printing money will be inflationary, as it increases the money supply without a corresponding real growth of the economy. At the same time, if the central bank ...
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ECB bond buying from national banks, what are the national banks expected to do?

The European Central Bank announced plans to buy government bonds from national banks. Quantitative Easing, 60 billion euros a month. Although ultimately I am trying to make a decision on what this ...
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How does a central bank create the money used for quantitative easing or lowering the value of their currency?

Up until last week, the Swiss central bank used Francs to buy Euros, in an effort to lower the value of the Franc; today the European central bank announced that it would use Euros to buy bonds in ...
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What did the Swiss National Bank use to purchase EUR while pegging the Franc to the Euro?

To peg its currency (CHF) to the Euro (EUR), the Swiss National Bank (SNB) made purchases of EUR to the tune of several hundred billion. By reducing the supply of EUR, the SNB made the EUR relatively ...
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Why did the Swiss National Bank end the currency peg?

The title says it all. Why did the Swiss National Bank end the currency peg? The issue obviously has many aspects, so I'm looking for a concise summary with references to explanations for each of ...
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Why did the Swiss National Bank abandon its currency peg so suddenly?

There are many theories about why the Swiss National Bank (SNB) abandoned its currency peg a few days ago. My question is more specific: why did they make the change so sudden? Why not reduce the ...
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Why do national governments not rent money from central banks directly? [closed]

The central bank gives money to the business banks, who then give that money to people, companies and government agencies/units. When a government controls the central bank, why doesn't the ...
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Central Banks and Price Stability

Are there any empirical studies on the question of whether independent central banks cause price stability? I am seeking to understand if independence (of the central monitory authority) is part of ...
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How do reserves move between the 12 federal reserve banks?

In single central banks systems (e.g. Bank of England) then the final ledger for electronic money transfer is the adjustment of reserve account balances. In the Federal Reserve System, there are 12 ...

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