The specific operation methods of the three tools are as follows:
1. Deposit reserve system
refers to the deposits prepared by financial institutions in the central part of the bank to ensure customers to withdraw deposits and capital settlement. The deposit reserve ratio required by the central bank of the bank is the deposit reserve ratio.
2. rediscount policy
Redistribution refers to the transfer of unexpired bills obtained by commercial banks or other financial institutions to the middle of the bank. For banks and central China, rediscount refers to the purchase of commercial banks, the holding of bills, the outflow of real money and the expansion of money supply.
For commercial banks, rediscounting means selling discounted bills to solve the temporary shortage of funds. The whole process of rediscounting is actually the process of buying and selling bills and transferring funds between commercial banks and central banks.
3. Open market business
Open market business refers to the activities of central banks to adjust the money supply by buying or selling valuable securities that absorb the base currency. Unlike ordinary financial institutions, banks and the central government buy and sell securities not for profit, but to regulate the money supply.
expanding information
1. Characteristics of the three tools of monetary policy
1. The main advantage of rediscount business is that it helps the central bank to play the role of lender of last resort and can adjust the total amount and structure of money supply.
2. Open market operation has the following advantages: First, the central bank can operate in time, buy and sell valuable securities of any size, and accurately control the reserve currency and base currency of the banking system at a reasonable level. Second, the open market operation has no "notification effect" and will not cause misunderstanding and confusion. Third, the open market operation in the middle of the bank does not determine the rate of return or the interest rate of other securities, so it will not directly affect the bank's income.
3. The disadvantages of the deposit reserve policy are: First, the effect is too great; Secondly, its policy effect is greatly influenced by the excess deposit reserve of commercial banks.
second, the role of the three major tools of monetary policy
statutory deposit reserve ratio: the central bank forces the deposits left by commercial banks not to lend. Raising or lowering the statutory reserve ratio will reduce or increase the loanable funds of banks, thus reducing or increasing the amount of money in the economy.
rediscount rate: the cost of borrowing from the central bank. If the rediscount rate is increased, the borrowing cost of commercial banks will increase, so they will increase their reserves to deal with emergencies such as customer withdrawals, so as to avoid borrowing from the central bank as much as possible. Increasing reserves means that the loanability of funds is reduced and the funds in the economy are reduced. So raising the rediscount rate will reduce the amount of money in the economy.
open market operation: first, the central bank sells its bonds to recover more economic funds; Second, the central bank printed money to buy bonds in the market, which increased the amount of money in the economy.