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Monetary Policy Instruments

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Discount Rate

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The interest rate charged by central banks on loans to commercial banks, influencing the money supply and credit conditions.

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Open Market Operations

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Buying and selling of government securities in the open market to regulate the money supply.

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Reserve Requirement

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The minimum amount of funds that a commercial bank must hold in reserve against customer deposits.

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Interest on Excess Reserves

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The rate that central banks pay commercial banks on their excess reserves, aimed at providing a safety net and controlling money supply.

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Term Auction Facility

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Program through which the central bank auctions fixed amounts of short-term loans to banks, aiming to improve liquidity.

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Quantitative Easing

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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.

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Repurchase Agreements

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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.

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Foreign Exchange Swaps

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Agreements to exchange currency between central banks, which can be used to stabilize the foreign exchange market and provide liquidity in a particular currency.

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Capital Requirements

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Regulatory standards for banks that determine the minimum capital ratios and ensure that banks can absorb a reasonable amount of loss.

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Countercyclical Capital Buffers

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Additional capital requirements that banks must accumulate in good times so that they can be drawn down in periods of stress.

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Credit Controls

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Direct or indirect control by the central bank over the amount of credit that commercial banks can offer to customers.

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Moral Suasion

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A strategy where the central bank persuades commercial banks to adhere to policy goals, without using formal authority or regulation.

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