Discount rate reserve requirement Open market Operation Persuading bank to tighten or loosen their credit policies In schweser only said Open market Operation is the most common tool. Thanks
any thought ?
Whats the question, open market operations are the most common tool, followed by the discount rate, then reserve requirement, and the last one is a bit general What is the question
Thanks, you just answered my question . I just want to know after Open market operation which tools they prefer most and less … Why they prefer using discount rate than reserve requirement ?
Err, if this is not part of the exam, then it’s probably not worth thinking about. But using common sense, it would be pretty hard for the Fed to frequently change something like the reserve requirement. Imagine Bernanke called up BofA and said, “Hey guys, you need to hold 10% of loans as collateral”. Then BofA has to go out and raise a bunch of money. Then, the next month, Bernanke calls again and says “Now it’s 15%. LOL Trollz!”. BofA will be like “FUuuuuuuu…”.