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Open market operations : beyond the new consensus

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  • Toporowski, Jan

Abstract

The emergence of the New Consensus in monetary policy has been followed by a renewal of interest in central banks' operating procedures, and specifically in the role of open market operations. There is a general view that overnight interest rates are most effectively controlled by standing or discount window facilities, rather than open market operations, and this view will probably now extend also to lender-of-last-resort intervention.The paper argues that this reduced role for open market operations is only in the context of controlling overnight rates of interest.In spite of the emphasis on control of overnight interest rates, medium and long-term interest rates remain the crucial instruments in the monetary transmission mechanism.Longer-term interest rates are susceptible to influence by open market operations, and their importance grows with financial development. Keywords: central banks, monetary policy, open market operations JEL classification numbers: E52, E58

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  • Toporowski, Jan, 2006. "Open market operations : beyond the new consensus," Research Discussion Papers 14/2006, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2006_014
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    References listed on IDEAS

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    1. Thomas M. Humphrey & Robert E. Keleher, 1984. "The lender of last resort : a historical perspective," Working Paper 84-03, Federal Reserve Bank of Richmond.
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    3. Charles Goodhart, 1999. "Myths About the Lender of Last Resort," FMG Special Papers sp120, Financial Markets Group.
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    6. Thomas H. Humphrey & Robert E. Keleher, 1984. "The Lender of Last Resort; A Historical Perspective," Cato Journal, Cato Journal, Cato Institute, vol. 4(1), pages 275-321, Spring/Su.
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    8. Bindseil, Ulrich, 2004. "Monetary Policy Implementation: Theory, past, and present," OUP Catalogue, Oxford University Press, number 9780199274543.
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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