scholarly journals The Costs and Benefits of Liquidity Regulations: Lessons from An Idle Monetary Policy Tool

2018 ◽  
Author(s):  
Christopher J Curfman ◽  
John Kandrac
Keyword(s):  
Monetary Policy ◽  
Costs And Benefits ◽  
Policy Tool

scholarly journals The Costs and Benefits of Liquidity Regulations: Lessons from an Idle Monetary Policy Tool

2021 ◽  
Author(s):  
Christopher J Curfman ◽  
John Kandrac
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Costs And Benefits ◽  
High Quality ◽  
Liquid Asset ◽  
Lower Odds ◽  
Credit Supply ◽  
Policy Tool ◽  
Regression Kink Design ◽  
Liquidity Regulation

Abstract We investigate how liquidity regulations affect banks by examining a dormant monetary policy tool that functions as a liquidity regulation. For causal inference, we use a regression kink design that relies on the variation in a marginal high-quality liquid asset requirement around an exogenous threshold. We show that mandated increases in liquidity cause banks to reduce credit supply. Liquidity requirements also depress banks’ profitability, though some of the regulatory costs are passed on to liability holders. We document a prudential benefit of liquidity requirements by showing that banks subject to a higher requirement just before the financial crisis had lower odds of failure.

Inflation expectations as a monetary policy tool

2021 ◽  
Vol 26 (2) ◽  
pp. 5-46
Author(s):  
Jin Ho Park ◽  
Jun Hee Kwak
Keyword(s):  
Monetary Policy ◽  
Inflation Expectations ◽  
Policy Tool

scholarly journals The Federal Reserve Banks New Monetary Policy Tool

2012 ◽  
Vol 10 (9) ◽  
pp. 533
Author(s):  
David Gordon
Keyword(s):  
Monetary Policy ◽  
Federal Reserve ◽  
Vital Role ◽  
Open Market ◽  
Federal Reserve Bank ◽  
Us Economy ◽  
Policy Tool ◽  
Reserve Bank ◽  
The Us ◽  
Demand Deposit

The Federal Reserve Bank (FED) plays a vital role in the US economy. The roles and functions of the Fed are discussed here. This paper also offers an explanation of the traditional tools the Fed uses to conduct monetary policy. Open market operations are explained. The important role of the discount rate is discussed. The legally required reserve ratios are also explored. This author believes that the Fed has recently created a new tool. This tool is the payment of interest on demand deposit accounts at the Fed. This new tool is explained and its ramifications explored. The functions of monetary policy are also expanded upon in this paper.

scholarly journals Overnight Rrp Operations as a Monetary Policy Tool: Some Design Considerations

2015 ◽  
Author(s):  
Joshua Frost ◽  
Lorie Logan ◽  
Antoine Martin ◽  
Patrick E. McCabe ◽  
Fabio M. Natalucci ◽  
...  
Keyword(s):  
Monetary Policy ◽  
Design Considerations ◽  
Policy Tool

scholarly journals Foreign Portfolio Investment Response to Monetary Policy Decisions in Nigeria: A Toda-Yamamoto Approach

2020 ◽  
Vol 13 (3) ◽  
pp. 166
Author(s):  
Gylych Jelilov ◽  
Bilal Celik ◽  
Yusuf Adamu
Keyword(s):  
Monetary Policy ◽  
Impulse Response Function ◽  
Portfolio Investment ◽  
Policy Decisions ◽  
Foreign Portfolio Investment ◽  
Policy Tool ◽  
Causality Model ◽  
Investment Response ◽  
Reserve Ratio ◽  
Future Path

This paper examined the response of foreign portfolio investment to Monetary Policy decisions of the Central Bank of Nigeria using monthly data spanning January 2007 to December 2018. The study adopted the Toda-Yamamoto Causality model and Generalized Impulse Response Function for analysis. The results showed that changes in monetary policy stance could only impact the behavior of foreign portfolio investment with 6-month lag and with marginal impact. This implies that monetary policy could still be effective even if the CBN decides to lose policy stance without losing significant capital flight. The conclusion from the findings is that monetary policy is just a signaling instrument for portfolio investors in Nigeria because it influences foreign portfolio investment through the Treasury bill rate rather than through MPR and CRR. The marginal response of investment due to changes in policy rate from the GIRF validate the TY results by indicating that monetary policy rate changes on its own may not be what investors are concern about, rather the expectation of the rates future path. The cash reserve ratio as a monetary policy tool does not seem to exert any impact on foreign portfolio investment.

Negative interest rates as a monetary policy tool

2020 ◽  
Vol 26 (8) ◽  
pp. 1731-1746
Author(s):  
D.A. Artemenko ◽  
I.I. Bychkova
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Developed Countries ◽  
Fund Raising ◽  
Situational Analysis ◽  
Policy Tool ◽  
Negative Interest Rates

Subject. We consider the application of negative interest rates by central banks of various countries, as a monetary policy tool. Objectives. We focus on reviewing the historical retrospect, potential risks, as well as positive and negative aspects of using negative interest rate instruments by developed countries. Methods. The study rests on the logical, systems, functional, and situational analysis, methods of grouping, and the monographic survey. Results. The use of negative interest rates as a monetary policy tool by financial regulators in various countries is a least-evil solution, which is aimed at improving the economy after the global economic crisis of 2008–2010. At present, positive and negative factors of the tools' impact on the financial sphere have been identified. In particular, the advantage is a balance between inflation and deflation, as the latter leads to a reduction in aggregate demand, an increase in unemployment, a fall in asset prices, and a slowdown in economic growth. The banking sector bears the risks of negative margin from operations involving fund-raising. The use of negative interest rates is possible, if other measures aimed at boosting economic growth are applied simultaneously. Conclusions. The findings can be used to investigate the negative interest rate instrument and evaluate its effectiveness. They can be helpful for financial market specialists.

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