mon_econ_week13 - The University of Sydney Faculty of...

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The University of Sydney Faculty of Economics and Business MONETARY ECONOMICS {6 credit points} ECOS3010 Tony Aspromourgos WEEK XIII : MONETARY POLICY IMPLEMENTATION IN AUSTRALIA—KEY POINTS 13.1 the payments system & money market 13.2 RBA market operations & ‘the cash rate’ 13.3 repurchase agreements 13.4 interest targeting 13.5 monetary policy & e-money READING: Reserve Bank of Australia (2003) ‘The Reserve Bank’s Open Market Operations’, RBA Bulletin June: 1–7. R. Battellino (2007) ‘Central Bank Market Operations’, RBA Bulletin September: 19–26 [and available via the RBA website: www.rba.gov.au/Speeches/2007/sp_dg_280807.html ]. G. Stevens (2008) ‘Liquidity and the Lender of Last Resort’, RBA Bulletin May: 83–91 [Pp. 83–87 in particular deal with central bank market operations, in the context of the 2007–2008 credit crisis. This reading was set for week 3 as well, and is in the photocopied readings at that point in the sequence of readings.] 13.1 the payments system & money market The payments system denotes the set of institutions via which the system of monetary payments – the (in our case, Australian) monetary system – is organized and given effect. As we saw in week 1, while liquidity – and hence the definition of ‘money’ – is ultimately a matter of degree, for practical purposes the means of monetary payment is outside money issued by the State (the Commonwealth of Australia) together with at-call bank deposits. The latter constitute the primary means of payment in the monetary system, via 3 attributes: their easy convertibility into outside money (at a fixed and certain nominal rate); their use as means of payment via electronic debit; and their use as means of payment via paper cheques drawable on bank deposits. Hence the private banks are at the centre of the payments system. But from day-to-day, the private banks must clear net payments they owe to other entities, and net payments owing to each of them by other entities: net deficits and surpluses between the private banks themselves, and between the private sector as a whole and the public sector, must be cleared. These transfers are
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This note was uploaded on 04/20/2010 for the course ECOF 3001 taught by Professor - during the One '09 term at University of Sydney.

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mon_econ_week13 - The University of Sydney Faculty of...

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