Chapter 11 (13) – Flashcards

quasi-public institution owned by the private commercial banks in its district that are members of the Federal Reserve System

a seven-member board, each member can serve one fourteen-year term plus part of another term. actively involved in the conduct of monetary policy in the following ways: -vote on the conduct of open market operations -sets reserve requirements -controls the fixed amount by which the discount rate exceeds the federal funds rate target -chair of the board advises the president of the US on economic policy, testifies in Congress, and speaks on behalf of the FRS to the media

meets eight times a year and makes decisions regarding the conduct of open market operations and the settling of the policy interest rate, the federal funds rate consists of 7 members of Board of Governors, president of the FRS of NY, and the presidents of four other FRB's

the purchase and sale of government securities that affect both interest rates and the amount of reserves in the banking system

the interest rate on overnight loans from one bank to another

a rise in the federal funds rate

lowering of the federal funds rate

the ability of the central bank to set monetary policy instruments

the ability of the central bank to set the goals of monetary policy

just before an election, expansionary policies are pursued to lower unemployment and interest rates

bureaucracies serving the public interest

the objective of a bureaucracy is to maximize its own welfare

1. budgets of the Federal Reserve Banks are controlled by the Board of governors, whereas the National Central Banks control their own budgets and the budget of the ECB in Frankfurt 2. the monetary operations of the Eurosystem are conducted by the National Central Banks in each country, so monetary operations are not centralized as they are in the Federal Reserve System 3. in contrast to the Federal Reserve, the ECB is not involved in supervision and regulation of financial institutions, these tasks are left to the individual countries in the European Monetary Union

the Eurosystem's charter cannot be changed by legislation, it can be changed only by revision of the Maastricht Treaty -- a difficult process because all signatories to the treaty must agree to accept any proposed change

late in establishing, founded in 1934. 3 year terms for directors, 7 year term the governor. governing council is made of 4 deputy governors and the governor, comparable to the FOMC that make decisions about monetary policy

founded in 1694, second oldest central bank. 1 governor and 2 deputy governors with 5 year terms. 16 non executive directors with 3 year terms. not a part of Eurosystem, makes its own monetary policy decisions. Monetary Policy Committee made up of 1 governor, 2 deputy governors, 2 members appointed by the governor

founded in 1882, Monetary policy is determined by the Bank's Policy Board; 1 governor, 2 vice governors, and 6 outside members appointed by the cabinet, all serving 5 year terms

increasing independence of central banks, used to be that the Federal Reserve was substantially more independent than almost all other central banks. now, newly established European Central Bank is far more independent than the Fed. greater independence has been granted to central banks like Bank of England, Japan, puts them on par with the Fed. theory and experience suggest more independent central banks produce better monetary policy.