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dexazuxo's version from 2017-05-13 14:27

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What are the routes within money markets for central bank to influence liquidity and set its price?1. Discount window
2. Open market operations
3. Repurchase agreements
What were the radical changes in 1998 and 20111998: New labour government introduced 2 changes in the central bank.
- Monetary policy: Gave instrument ind├ępendance to BOE for the first time ever and removed the governments direct control over interest rates
- Supervisor policy: reduced BOE role by getting up the FSA with pole powers to supervise banking.
2011: New coalition government blamed the FSA for collapse of RBS, northern rock and other banks as they lacked technical knowledge which loosened policy and allowed the damage.
- Transferred supervisory responsibility back to BOE with 2 new divines to prevent banking collapse and ensure good banking conduct - PRA, FCA
History of QE:2001 - 2006 - Japan faced deflation as interest rates fell to almost 0. BOJ implemented massive purchase of financial assets which had limited impact on economic growth.
2008 - 2015 - Collapse of financial confidence threatened to turn global recession into a depression. USA federal reserve initiated QE1
- BOE, ECB, BOE followed.
UK and US successful in preventing depression and turned around economic activity. ECB less successful.
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