open market operations


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open market operations

The buying and selling of securities in order to control the money supply. This is normally done by the central bank. If the central bank wants to increase the money supply it will buy securities (in this case pieces of paper carrying the promise to repay the money) from the commercial banks giving the banks extra money. If the central bank wants to decrease the money supply it will sell securities to the commercial banks leaving them with less money.
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Open market operations serve as a monetary tool wherein the BSP publicly buys or sells government securities from banks and financial institutions in order to expand or contract the supply of money.
The auction-based TDF, one of BSP's open market operation, is a liquidity-absorbing tool.
We will consider open market operations if liquidity needs to be injected," he said.
"With immediate effect, in accordance with the needs of the monetary policy, open market operations will be carried out on each working day," the PBOC said, in a (http://www.pbc.gov.cn/zhengcehuobisi/125207/125213/125431/125469/3018927/index.html) statement released Wednesday, adding that it will issue notices on the days that it refrains from using the tool due to insufficient demand.
Indeed, from September 23 to mid-December, the Desk frequently executed open market operations that had the effect of draining reserves.
The Fed supplies the market with credit through open market operations and, to a much lesser extent historically, through loans to depository institutions at the discount window.
Recognizing that interest rate policy reductions had essentially reached a zero bound, the Committee stressed that the "Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability." Further, the Committee stated that the focus of "policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level."
''If the needs for open market operations continue to decline, at least we may need to make a technical response, which allows the targeted outstanding current account balance to be missed while keeping the target range itself,'' Miyako Suda said in a speech.
government securities that the Federal Reserve has acquired through open market operations. This income amounted to $22.344 billion in 2004.
(4.) Monetary policy is implemented through open market operations, purchases and sales of government securities from the Fed's portfolio.
The prevalent thinking about liquidity traps suggests that the perfect substitutability of money and bonds at a zero short-term nominal interest rate renders open market operations ineffective for achieving macroeconomic stabilization goals.
The supply of reserves S is determined by central bank actions to supply reserves through open market operations and its discount or lending facility and by nonpolicy factors affecting reserve supply.