Brief Outline of Topics Covered in Lecture 8
Chapter 15 Tools of Monetary Policy [cont.]
The Market for Reserves and the Federal Funds Rate
- Tools of monetary policy: Open Market Operations, Discount Policy, and Reserve Requirements
- Unconventional Policy
Chapter 19 Money Demand
Quantity Theory of Money
Keynes’s Liquidity Preference Theory
- Velocity of Money and Equation of Exchange
- Quantity Theory
- Quantity Theory of Money Demand
Is velocity a constant?
- Transactions Motive
- Precautionary Motive
- Speculative Motive
- Putting the Three Motives Together
Further Developments in the Keynesian Approach
Fed Worries About Effects of Its New Interest Rate Tool on Markets, Real Time Economics, WSJ: When the Federal Reserve started tests late last year of its so-called reverse repo facility, some officials hoped it would play a starring role in the campaign to raise interest rates when the time comes.
But now the Fed thinks the new tool will play no more than a “useful supporting role,” largely because of rising concerns about its potential effects on the financial system, according to the meeting minutes of the Fed’s June policy meeting and recent comments by Fed officials (who spoke before the week-long blackout period preceding their next meeting July 29-30). ...
Together, the minutes and officials’ remarks shed light on the Fed’s continuing internal debate over how to raise short-term interest rates from near zero, where they have been since late 2008. Officials are still weighing which tools to use and in what combination. ...[continue]...