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 Federal Reserve’s M2 definition of the money supply includes all physical currency, checking account deposits, traveler’s checks, money market mutual fund balances, and other time deposits. M2 growth is a key indicator of future inflationary pressure in the economy. If M2 growth is too high, it can lead to inflationary pressures in the economy. … Read more
What is a liquidity trap? A liquidity trap is when people are holding onto cash because they believe that it will be worth more in the future. This can happen for a variety of reasons, but typically happens when there is high inflation or when the economy is in a recession. What is liquidity with … Read more
The South African Reserve Bank (SARB) is the central bank of South Africa. It was established in 1921 after the Union of South Africa was formed and is responsible for the country’s monetary policy. The SARB is also the sole issuer of banknotes and coins in South Africa. The SARB’s primary objective is to achieve … Read more
The Group of Seven (G-7) is an informal grouping of seven of the world’s largest advanced economies: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. The European Union is also represented at the G-7 meetings. The G-7 countries represent more than 64% of the world’s net wealth ($263 trillion in 2016), … Read more
The Federal Reserve’s monetary policy implements sterilization when it conducts operations to remove the effects of its monetary policy actions on the overall level of reserves in the banking system. The Fed achieves this by selling securities in the open market after it has bought securities in the open market to expand the money supply. … Read more
The ECB is the central bank of the European Union (EU). Its main task is to maintain the euro’s value and stability. The ECB was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt, Germany. The ECB’s primary monetary policy tool is interest rates. It sets the overnight lending rate for … Read more
