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The Role of Central Bank Lending in the Conduct of Monetary Policy

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Abstract

Central banks can extend credit in pursuit of different policy objectives, two of which are discussed in this Economic Brief. First, lending can be used to achieve interest rate control. Second, lending can be used to provide liquidity insurance. A narrow view of central bank lending emphasizes the first objective, in which subsidized credit to targeted market participants is not seen as essential. A broader view considers targeted lending as sometimes necessary. Which perspective is favored is largely, though not wholly, dependent on judgments about the prevalence of frictions that inhibit the market's ability to allocate liquidity.

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  • Huberto M. Ennis & John A. Weinberg, 2016. "The Role of Central Bank Lending in the Conduct of Monetary Policy," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue December.
    • Handle: RePEc:fip:fedreb:00047
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    File URL: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_brief/2016/pdf/eb_16-12.pdf
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    Cited by:

    1. Huberto M. Ennis, 2016. "Models of Discount Window Lending: A Review," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 1-50.
    2. Huberto M. Ennis & Elizabeth C. Klee, 2021. "The Fed's Discount Window in "Normal" Times," Working Paper 21-01, Federal Reserve Bank of Richmond.
    3. Liu Kerry, 2019. "Some Preliminary Evidence on China’s New Monetary Policy Tool: The Standing Lending Facility," Review of Economics, De Gruyter, vol. 70(2), pages 137-155, August.

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