Unformatted text preview: d as deserving special attention in
3. Why is monetary policy transmitted through the banking system? Specialness and Regulation
In the preceding section, FIs were shown to be special because of the various services
they provide to sectors of the economy. The general areas of FI specialness include:
• Information services.
• Liquidity services.
• Price-risk reduction services.
• Transaction cost services.
• Maturity intermediation services.
Areas of institution-specific specialness are as follows:
• Money supply transmission (banks).
• Credit allocation (thrifts, farm banks).
• Intergenerational transfers (pensions funds, life insurance companies).
• Payment services (banks, thrifts).
• Denomination intermediation (mutual funds, pension funds). Negative Externalities
Action by an economic
agent imposing costs
on other economic
The procedure by
which a banker refuses
to make loans to residents living inside
boundaries. Failure to provid...
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This document was uploaded on 03/09/2014 for the course ACC 301 at HELP University.
- Spring '09