ECO3011012 - Target Feds Funds Rate: Not a market interest...

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ECO 301 10/12/11 Open market operations transaction types - outright purchases and sales - repurchase agreements o buys security from a dealer (capital influx?) who agrees to but it back, usually within a week - matched sale –purchase transaction o fed sells to a dealer who agrees to sell it back in near future (MS retraction?) Defensive Open Market Operations - designed to offset effects on Ms o c ratio changes o e ratio changes o Treasury actions o Designed to offset something else (press gas when going up a hill) - Dynamic OMO o Designed to change Ms
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Unformatted text preview: Target Feds Funds Rate: Not a market interest rate-not even an interest rate, a number-Fed occasionally changes number at open market committee meetings Borrowing/Lending Fed Funds-Fed buy reserves from one bank and places them in another bank-Reallocating reserves, no additional money in system Discount Loans:-generate more reserves-more money in the system-used prominently during financial crisis How does the Fed keep the Fed Funds Rate at the target level?...
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