A clean float is a monetary policy regime in which a nation’s currency is allowed to freely float on the open market without intervention from the nation’s central bank. The central bank does not attempt to influence the currency’s exchange rate by buying or selling currency in the open market. What are the 3 types … Read more
A dirty float is a monetary policy in which a central bank allows the exchange rate of its currency to fluctuate in a band, while intervening in the market to prevent excessive appreciation or depreciation outside of the band. The central bank may use a number of different tools to achieve this, including buying or … Read more
Accommodative monetary policy is when a central bank uses its monetary policy tools to stimulate economic growth. This can be done by lowering interest rates, increasing the money supply, or using other methods to make credit easier to obtain. The goal of this type of policy is to increase aggregate demand in the economy and … Read more
The helicopter drop is a monetary policy tool that involves the central bank directly injecting money into the economy by giving it out to citizens as a form of stimulus. The name comes from the image of a helicopter dropping money from the sky. The helicopter drop is an unconventional form of monetary policy because … Read more
The Old Lady Definition is a set of guidelines used by the Bank of England to help it set monetary policy. The definition was first set out in a speech by then-Governor Mervyn King in 2003, and it has been used by the bank ever since. The definition is based on the idea that the … Read more
The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. The IMF’s primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and … Read more
The Fed’s Tapering: How, Why, and When It Happens, and Its Impact on Financial Markets What happens when the Fed stops buying bonds? When the Fed stops buying bonds, the prices of those bonds will fall and interest rates will rise. This will lead to higher borrowing costs for businesses and consumers, and will reduce … Read more
A liquidity adjustment facility (LAF) is a monetary policy tool used by the Reserve Bank of India (RBI) to regulate the money supply in the economy. The LAF consists of two components: the repo rate and the reverse repo rate. The repo rate is the interest rate at which the RBI lends money to banks, … Read more
Demonetization: What It Is and How It Works What do you mean by demonetisation and explain its impact? Demonetisation is the process of withdrawing a particular currency unit from circulation and making it no longer legal tender. The impact of demonetisation can be both positive and negative. On the positive side, it can help to … Read more
The term “Common Equity Tier 1 (CET1)” refers to the core tier of a bank’s equity capital, which consists of common stock, retained earnings, and other disclosed reserves. CET1 capital is considered to be the highest quality capital, and is therefore the most important component of a bank’s total capital. CET1 capital is used to … Read more
