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Standing Facilities Versus Open Market Operations: Equivalence Results

Listed author(s):
  • Alessandro Marchesiani

    (University of Minho)

  • Aleksander Berentsen

    (University of Basel)

In this paper we compare two mechanisms for implementing monetary policy: standing facilities and open market operations. We show that any equilibrium allocation that can be attained with open market operations can be replicated with standing facilities, but that the converse is not true. Furthermore, the set of equilibrium allocations that can be attained with standing facilities is weakly dominated in terms of welfare by the set of equilibrium allocations that can be attained with open market operations. However, if the central bank chooses the optimal policy for each mechanism, the allocations are equivalent.

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File URL: https://economicdynamics.org/meetpapers/2010/paper_929.pdf
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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 929.

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Date of creation: 2010
Handle: RePEc:red:sed010:929
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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