The scope of monetary policy actions authorized under the Federal Reserve Act
AbstractThe Federal Reserve Act authorizes the Federal Reserve to undertake various types of discount window loans and open market operations. While the Federal Reserve generally has not found it necessary to use all types of such authority, there could be circumstances in which the Federal Reserve might need to consider utilizing its statutory authority more broadly than it has in the past. We examine the limits imposed by the Federal Reserve Act along two dimensions: those types of counterparties and financial instruments with which the Federal Reserve may conduct monetary policy. In doing so, we develop a theme not commonly pursued in the literature--the ways and extent to which the Federal Reserve Act limits the Federal Reserve from taking credit risk onto its balance sheet. We also provide some historical perspective on how the current powers of the Federal Reserve came to be authorized.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2004-40.
Date of creation: 2004
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-09-05 (All new papers)
- NEP-CBA-2004-09-05 (Central Banking)
- NEP-MAC-2004-09-05 (Macroeconomics)
- NEP-MON-2004-09-10 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James A. Clouse, 1994. "Recent developments in discount window policy," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 965-977.
- James Clouse & Dale Henderson & Athanasios Orphanides & David Small & Peter Tinsley, 2000.
"Monetary policy when the nominal short-term interest rate is zero,"
Finance and Economics Discussion Series
2000-51, Board of Governors of the Federal Reserve System (U.S.).
- Clouse James & Henderson Dale & Orphanides Athanasios & Small David H. & Tinsley P.A., 2003. "Monetary Policy When the Nominal Short-Term Interest Rate is Zero," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-65, September.
- Michael J. Fleming, 2000. "The benchmark U.S. Treasury market: recent performance and possible alternatives," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 129-145.
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