Econ423-Spr16-Slides_Class_1

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5/25/2016 1 1 The Federal Reserve System Structure, Objectives, and Tools Topics in Financial Economics ECON 423 – Spring 2016 Christina P. Tapia, Ph.D. May 24, 2016 Established by Federal Reserve Act of 1913: Fed is “independent within the government” Decisions do not need to be ratified by the President or other member of executive branch, but… Federal Reserve System is subject to oversight by Congress and Federal Reserve must still work within framework of government’s economic and financial policy Section 2A. Monetary Policy Objectives ‐ Fed’s “dual mandate” Section 13.3 “Unusual and exigent circumstances” The Federal Reserve System
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5/25/2016 2 3 The Goals of the Fed Protect the health of the economy through monetary policy. Price stability Maximum employment / maximum sustainable growth “Dual mandate” Which indicators does the Fed monitor for these two objectives? “Statement on Longer‐Run Goals and Monetary Policy Strategy” (1/26/2016) 4 The Goals of the Fed Protect the health of the financial system.
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