Unconventional Monetary Policy

Unconventional Monetary Policy: “Unconventional monetary policy” means the Fed targets some level of nominal GDP and keeps buying things until that level is met. Usually, the Fed buys and sells short term Treasuries to influence the clearing price of reserves in the overnight interbank market. The clearing interest rate in the overnight interbank market is the “Federal Fund Rate” and this intervention is the mechanism it uses to manage the level of excess reserves in the system (as it can drain reserves by converting them to Treasuries). Scott argues that the Fed can buy other things, like road repair services, bridge building services, etc. etc. and therefore hit any NGDP target it chooses. [Hmmm.]
Source: Zimran
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s