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Economic Perspectives March 1997
Economic Perspectives March 1997

... would not be in the country’s best interests in the long run. Many countries, including the U.S., have confronted this issue. While Poland has come a long way in reforming its banking system, in our view more progress needs to be made before Polish banks can operate efficiently. We believe the key p ...
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... for conducting monetary policy. A cornerstone of inflation targeting is a publicly announced numerical value, or range, for some measure of inflation. Some, but not all, inflation targeting central banks also make public the forecasts, or projections, upon which their policy decisions are based.The ...
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... Alger (1999) emphasized that, a bank should choose not to invest all its available funds in (typically long-term) loans; indeed, it should keep some of the funds in cash (or reserves at the central bank) and/or invest in marketable securities such as Treasury bills and bonds. Goldfeld & Chandler. (1 ...
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... perfectly liquid in that it can instantly be exchanged for goods, ...
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... In 1979, President Carter appointed Paul Volcker as chair of the Federal Reserve Board to bring inflation under control. Influenced by Friedman’s writings on monetary policy, Volcker set out to slow the growth of the money supply. The result of his slow-growth policy was a far faster reduction in th ...
James A. Dorn MONEY, MACROECONOMICS, AND FORECASTING
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... Yeager-Greenfield scheme, because no commodity price index is being held constant. Rather, “stability of income” would occur “automatically as an unintended consequence of... free bankers’ profit-maximizing behavior” (Selgin 1992, p. 80).” The tendency toward monetary equilibrium under Selgin’s free ...
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... Transparency and Forward Guidance: FOMC Statement (10/24/2012) Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without further policy accommodation, economic growth might not be strong enough to gener ...
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... form of cash or cheques. The amount of deposits in banks reduces immediately by the amount of the govt bonds sold. Assume that banks hold no excess reserves, they have to recall back the loans. Their lending as well as credit creation ability will be reduced. Sales of govt bonds will reduce the mone ...
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... Recommended/required text(s) There is no textbook. Articles The book Readings in Monetary Economics contains copies of the key articles referred to in lectures and those needed for tutorials. It is recommended that you purchase this book which is available at the UWA Bookshop. Lecture notes The book ...
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... form of cash or cheques. The amount of deposits in banks reduces immediately by the amount of the govt bonds sold. Assume that banks hold no excess reserves, they have to recall back the loans. Their lending as well as credit creation ability will be reduced. Sales of govt bonds will reduce the mone ...
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... conventional system will change the character and nature of the banks form monetary institutions to financial institutions. They, in turn, change the legal character of money to that of capital and hence making it eligible to claim profit. ...
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... conventional system will change the character and nature of the banks form monetary institutions to financial institutions. They, in turn, change the legal character of money to that of capital and hence making it eligible to claim profit. ...
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... • Coins and paper currency act as primary mediums of exchange – money. • Demand deposits held at banks and depository institutions provide the same function as currency – money. ...
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... variables such as money supply or growth or employment. In consequence, it failed to stabilise price levels and real interest rates – in other words, output and employment were unnecessarily sacrificed to external equilibrium.8 It is also evident that the gold specie flows, through which adjustment ...
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... In a fully dollarized economy, monetary authorities cannot act as lender of last resort to commercial banks by printing money. The alternatives to lending to the bank system may include taxation and issuing government debt.3 The loss of the lender of last resort is considered a cost of full dollariz ...
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... If any negotiable instrument (e.g. a cheque) is deposited in your account, the proceeds will be credited to your account, but will only be available when the negotiable instrument has been honoured. If the negotiable instrument is dishonoured, your account shall be debited accordingly and we will re ...
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... a bank that specializes in retirement savings accounts c. a type of savings and loan that makes housing loans d. a cooperative lending institution for a particular group 77. How does a bank make most of its profit on its business? 269 a. by collecting fees on credit card purchases b. by collecting f ...
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Fractional-reserve banking

Fractional-reserve banking is the practice whereby a bank accepts deposits, and holds reserves that are a fraction of the amount of its deposit liabilities. Reserves are held at the bank as currency, or as deposits in the bank's accounts at the central bank. Fractional-reserve banking is the current form of banking practiced in most countries worldwide.Fractional-reserve banking allows banks to act as financial intermediaries between borrowers and savers, and to provide longer-term loans to borrowers while providing immediate liquidity to depositors (providing the function of maturity transformation). However, a bank can experience a bank run if depositors wish to withdraw more funds than the reserves held by the bank. To mitigate the risks of bank runs and systemic crises (when problems are extreme and widespread), governments of most countries regulate and oversee commercial banks, provide deposit insurance and act as lender of last resort to commercial banks.Because bank deposits are usually considered money in their own right, and because banks hold reserves that are less than their deposit liabilities, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying reserves of base money originally created by the central bank. In most countries, the central bank (or other monetary authority) regulates bank credit creation, imposing reserve requirements and capital adequacy ratios. This can limit the amount of money creation that occurs in the commercial banking system, and helps to ensure that banks are solvent and have enough funds to meet demand for withdrawals. However, rather than directly controlling the money supply, central banks usually pursue an interest rate target to control inflation and bank issuance of credit.
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