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Monetary Policy Instruments
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Flashcards
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Discount Rate
The interest rate charged by central banks on loans to commercial banks, influencing the money supply and credit conditions.
Open Market Operations
Buying and selling of government securities in the open market to regulate the money supply.
Reserve Requirement
The minimum amount of funds that a commercial bank must hold in reserve against customer deposits.
Interest on Excess Reserves
The rate that central banks pay commercial banks on their excess reserves, aimed at providing a safety net and controlling money supply.
Term Auction Facility
Program through which the central bank auctions fixed amounts of short-term loans to banks, aiming to improve liquidity.
Quantitative Easing
A monetary policy where the central bank purchases longer-term government securities or other types of assets to increase the money supply and encourage lending and investment.
Repurchase Agreements
Short-term loans where commercial banks sell securities to the central bank with an agreement to repurchase them at a higher price, effectively receiving a loan from the central bank.
Foreign Exchange Swaps
Agreements to exchange currency between central banks, which can be used to stabilize the foreign exchange market and provide liquidity in a particular currency.
Capital Requirements
Regulatory standards for banks that determine the minimum capital ratios and ensure that banks can absorb a reasonable amount of loss.
Countercyclical Capital Buffers
Additional capital requirements that banks must accumulate in good times so that they can be drawn down in periods of stress.
Credit Controls
Direct or indirect control by the central bank over the amount of credit that commercial banks can offer to customers.
Moral Suasion
A strategy where the central bank persuades commercial banks to adhere to policy goals, without using formal authority or regulation.
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