The Role of the Federal Reserve as "Lender of Last Resort" and the Seasonal Fluctuation of Interest Rates

1991 ◽  
Vol 23 (4) ◽  
pp. 659 ◽  
Author(s):  
A. Steven Holland ◽  
Mark Toma
Keyword(s):  
Interest Rates ◽  
Federal Reserve ◽  
Seasonal Fluctuation ◽  
Lender Of Last Resort

scholarly journals The Federal Reserve’s Dollar Swap Lines and the European Central Bank during the global financial crisis of 2007–09

2020 ◽  
Vol 44 (4) ◽  
pp. 723-747 ◽  
Author(s):  
Emmanuel Carré ◽  
Laurent Le Maux
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Federal Reserve ◽  
European Central Bank ◽  
Global Financial Crisis ◽  
Lender Of Last Resort ◽  
European Central ◽  
The Interest Rate ◽  
The Global Financial Crisis

Abstract Although the literature has studied the role of the Federal Reserve as the global lender of last resort in 2007–09, many aspects of the Dollar Swap Lines to the European Central Bank need further exploration. Accordingly, we provide original evidence about the auction operations, allotted amounts and interest rates with regard to the Federal Reserve’s dollar swaps and the European Central Bank’s dollar provision. More specifically, we examine the demand side of the Dollar Swap Lines (whereas the existing literature mentions the supply side only) and we scrutinise the interest rate (whereas the literature concentrates on volumes) set by the Federal Reserve, and also the rate set by the European Central Bank. Our findings cast light on the nature of the relationship between the Federal Reserve and the European Central Bank. Finally, we contribute to the literature on the global lender of last resort by coining the notion of the financial dilemma, under the dollar system within a framework of globalised financial markets.

scholarly journals The Spillover Effects of Fed’s Policies with Emphasis to the Fragile Five

2014 ◽  
Vol 6 (12) ◽  
pp. 1011-1020
Author(s):  
Mehmet ORHAN ◽  
Halil İbrahim ÇELİKEL .
Keyword(s):  
Interest Rates ◽  
Foreign Exchange ◽  
Federal Reserve ◽  
Stock Exchange ◽  
Spillover Effects ◽  
Wall Street ◽  
Federal Reserve Bank ◽  
Reserve Bank ◽  
Almost All

Since the Bretton Woods Agreement, the U.S. dollar has played the role of dominant global currency. As a result, the Federal Reserve Bank has many privileges such as the ability to run trade deficits without foreign exchange reserves. In the world, foreign exchange rates of currencies are quoted against the dollar, and majority of currency trading involves the dollar. Besides, international trade in primary commodities, such as oil, wheat, gold and coffee are bought and sold in U.S. dollar. The central banks of countries hold major positions of their international reserves in dollars. Any changes in its interest rates automatically alter the revenues of all world assets. With deregulated financial markets, the spillover effects of the Federal Reserve Bank’s decisions have increased. In this paper, we examine the impacts of Federal Reserve Bank policies over the Fragile Five that is a sub group of the weaker emerging markets namely Brazil, India, Indonesia, South Africa and Turkey. We are mainly focusing on the consequences of changes in Fed’s policies on the fragile five’s basic indicators; exchange rate, interest rate, and the stock exchange indices. All Fragile Five currencies have been depreciated by about 10 to 25% after the Fed tapering decisions. In addition we test for mean and volatility spillover of Wall Street on stock exchange indices of the Fragile Five in GARCH in mean framework and document the existence of such spillovers in almost all cases.

scholarly journals What Powers for the Federal Reserve?

2010 ◽  
Vol 48 (1) ◽  
pp. 134-145 ◽  
Author(s):  
Martin Feldstein
Keyword(s):  
Federal Reserve ◽  
Mortgage Lending ◽  
Policy Recommendations ◽  
Lender Of Last Resort ◽  
Holding Companies ◽  
The Past ◽  
Definition Of ◽  
New Consumer ◽  
Better Than

In this essay, I explain my reasons for the following policy recommendations: (1) The Fed should continue to manage monetary policy as it has in the past, should act as the nation's lender of last resort, should fully supervise the large bank holding companies and their subsidiary banks, and should be given resolution authority over the institutions that it supervises. (2) While a council of supervisors and regulators can play a useful role in dealing with macro prudential risks, it should not replace the central role of the Federal Reserve. (3) The virtually unlimited lending powers that the Fed has recently exercised in creating credit and helping individual institutions should be restricted in duration and subjected to formal Treasury approval backed by Congressional preauthorization of funds. (4) The Fed's capital rules for commercial banks need to be strengthened by replacing the existing risk-based capital approach with a broader definition of risk and the introduction of contingent capital. (5) Subjecting mortgage lending to a broader range of Federal Reserve regulations and allowing the Fed to deal with nonbank creators of mortgage products would be better than the creation of a new consumer financial protection organization. (JEL E52, E58, G21, G28)

scholarly journals Monetary Stability and Liquidity Crises: The Role of the Lender of Last Resort

2001 ◽  
Vol 99 (1-2) ◽  
pp. 187-219 ◽  
Author(s):  
Gaetano Antinolfi ◽  
Elisabeth Huybens ◽  
Todd Keister
Keyword(s):  
Lender Of Last Resort ◽  
Monetary Stability ◽  
Liquidity Crises

Sukuk and monetary policy transmission in Indonesia: the role of asset price and exchange rate channels

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suriani Suriani ◽  
M. Shabri Abd. Majid ◽  
Raja Masbar ◽  
Nazaruddin A. Wahid ◽  
Abdul Ghafar Ismail
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Asset Price ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Content Type ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

Purpose The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in the Indonesian economy. Design/methodology/approach Using the monthly data from January 2003 to November 2017, this study uses a multivariate vector error correction model causality framework. To examine the role of sukuk in the monetary policy transmission mechanism through the asset price channel, this study uses the variables of consumption, inflation, interest rates, economic growth and the composite stock price index. Meanwhile, to examine the role of sukuk in the monetary policy transmission mechanism through the exchange rate channel, this study used variables of inflation, interest rates, economic growth, foreign investment and exchange rate. Findings This study documented that sukuk has no causal relationship with inflation through asset price and exchange rate channels. Nevertheless, sukuk has a bidirectional causal relationship with economic growth through asset price and exchange rate channels. Sukuk is also documented to have a causal relationship with monetary policy variables of interest rate and stock prices through asset price and exchange rate channels. Finally, a unidirectional causality is recorded running from the exchange rate to sukuk in the exchange rate channel. Research limitations/implications The finding of independence of the sukuk market from interest rates provides evidence that the trading of the sukuk in Indonesia has been in harmony with the Islamic tenets. Practical implications The relevant Indonesian authorities need to enhance both domestic and global sukuk markets as part of efforts to promote the sustainability of Islamic capital market development in Indonesia. Originality/value To the best of the authors’ knowledge, this study is among the first attempts to empirically investigate the role of sukuk in monetary policy transmission through asset price and exchange rate channels in the context of the Indonesian economy.

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