ECON 161A Lecture Notes - Lecture 12: If And Only If, Quantitative Easing, Excess Reserves
Document Summary
Central banking became stable throughout 90"s and early 2000"s. Fed"s had tools that it used a lot that worked well to implement stabilizing inflation and output. The fed responded by making new policy tools to respond to recession. Crisis in money market so that they can slip money into the different parts of the money system (they"re unconventional because they haven"t been used previously) Conventional monetary policy tools of the fed: open market operations: purchase/sale of us t-bills. Note: buying long term bonds, it"s called qualitative easing. Manage supply of reserves (they change the size of the mb) Uses this as a way to set the federal funds rate target (typically) Fed"s would rather have banks take loans from each other rather than the fed: interest on reserve balances: as of sept. 2008 (the fed was given the interest of reserves before this time, so it"s considered conventional)
