Money Supply: Theory and Organization

2005 ◽  
pp. 48-60
Author(s):  
V. Burlachkov
Keyword(s):  
Interest Rate ◽  
Banking System ◽  
Central Banks ◽  
Open Market ◽  
Economic Rent ◽  
Payment Systems ◽  
Exchange Rate Dynamics ◽  
Money Multiplier ◽  
The World ◽  
The Difference

The effect of money multiplier is determined by credit activities of the banking system and depends upon the value of the difference between average profitability in the economy and interest rate. The modification of payment systems may lead to decreasing central banks possibilities of money regulation. Seigniorage which is obtained by the banking system is a kind of economic rent. The effect of money multiplier reveals itself in the world credit market and influences exchange rate dynamics of reserve currencies. Using government securities as the main asset of central banks and as an instrument of open market operations leads to appreciation of interest rate and to decreasing of credit activities in the economy. A perspective instrument of money regulation is allocation of central banks deposits with commercial banks.

Financial and Monetary Stability Aspects of Global Stablecoins

2020 ◽  
Vol 53 (2) ◽  
pp. 159-185
Author(s):  
Stefan Schäfer ◽  
Oliver Read
Keyword(s):  
Exchange Rates ◽  
Banking System ◽  
Central Banks ◽  
Jel Classification ◽  
Monetary Stability ◽  
Digital Currency ◽  
National Currencies ◽  
Starting Point ◽  
The World ◽  
The One

Abstract Global stablecoins (GSCs) like Facebook’s Libra could prove much more instable than they might appear at first sight. Not only can their exchange rates against individual fiat currencies fluctuate substantially; theoretically, they also have the potential to replace national currencies, constitute “digital currency areas” and become the basis of a two-tier banking system with one and more GSC issuers, on the one hand, and, on the other hand, commercial banks that can create GSC deposit money. Against that background, all steps taken so far by supervisors and central banks can only be the starting point of what is necessary to effectively regulate the new normal of the world of money that is emerging. JEL Classification: E42, F65, G28, K24

scholarly journals Over- and Underbidding in Central Bank Open Market Operations Conducted as Fixed Rate Tender

2005 ◽  
Vol 6 (1) ◽  
pp. 95-130 ◽  
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Banking System ◽  
Central Banks ◽  
General Question ◽  
Open Market ◽  
Short Term ◽  
Fixed Rate ◽  
Proposed Model

Abstract Open market operations play a key role in allocating central bank funds to the banking system and thereby in steering short-term interest rates in line with the stance of monetary policy. Many central banks apply so-called ‘fixed rate tender’ auctions in their open market operations. This paper presents, on the basis of a survey of central bank experience, a model of bidding in such tenders. In their conduct of fixed rate tenders, many central banks faced specifically an ‘under-’ and an ‘overbidding’ problem. These phenomena are revisited in the light of the proposed model, and the more general question of the optimal tender procedure and allotment policy of central banks is addressed.

scholarly journals Cryptocurrencies: technology, initiatives of banks and central banks, and regulatory challenges

2021 ◽  
Vol 30 (2) ◽  
pp. 467-496
Author(s):  
Carlos Eduardo Carvalho ◽  
Desirée Almeida Pires ◽  
Marcel Artioli ◽  
Giuliano Contento de Oliveira
Keyword(s):  
Banking System ◽  
Central Banks ◽  
Payment Systems ◽  
Settlement Systems ◽  
Monetary System ◽  
Paper Currency ◽  
International Banks ◽  
Monetary Order ◽  
Technology Initiatives ◽  
Regulatory Challenges

Abstract This paper analyses the impacts of the innovation known as distributed ledger technology (DLT) on the monetary system and on financial activities. Private cryptocurrencies, such as Bitcoin, are permissionless means of payment, based on blockchain, a form of DLT. Evaluations suggested that these private cryptocurrencies could compete with the banks payment systems and even supplant state currency. The development of these technologies has the potential to modify profoundly monetary and financial practices, but there are no indications that they may threaten the centrality of state money and the banking system in the contemporary monetary order. Major international banks have developed cryptocurrencies for settlement systems and for interbank transactions, including the so-called stablecoins, issued by highly technological companies with on par conversion into state money. Some central banks are studying the launch of state cryptocurrencies that could coexist with their fiduciary state currency and even replace their paper currency. The use of this technology results in new challenges for regulation, including the fact that cryptocurrencies can be used for money laundering and by organized crime.

Central Bank Digital Currency and Financial Stability in a Dual Banking System

2020 ◽  
pp. 233-252
Author(s):  
Hichem Hamza ◽  
Khoutem Ben Jedidia
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Financial Stability ◽  
Banking System ◽  
Central Banks ◽  
Peer To Peer ◽  
Payment Mechanism ◽  
Digital Currency ◽  
Pros And Cons ◽  
Open Question

The digitization of payment and the development of private digital currencies have constrained central banks to examine the issuance of their own central bank digital currency (CBDC) in order to face the competition of the new peer-to-peer payment system and the decline of cash use. This chapter addresses the topic of CBDC and places the discussion within the context of dual banking intermediation and financial stability. The design of CBDC in term of accessibility, anonymity, interest rate, and payment mechanism depends on the cryptocurrency use and money characteristics regarding the use of cash and deposit. The CBDC Sharia compliant, free of interest or PLS-based, fulfilling money value stability might be a solution. The effects of CBDC on banking intermediation and financial stability depend importantly on the CBDC design and switch significance of banks deposit to CBDC but remain an open question given the pros and cons arguments. In a dual banking system, Islamic banks could limit the disintermediation effect and maintain financial stability under Sharia compliance.

Conceptual provisions of management percentage risk in international practice

2021 ◽  
pp. 205-218
Author(s):  
Valentin Yur’evich Vakhrushev ◽  
Andrey Viktorovich Zakharov ◽  
Mikail Bekzadaevich Khudzhatov
Keyword(s):  
Russian Federation ◽  
Commercial Banks ◽  
Banking System ◽  
Developed Countries ◽  
Central Banks ◽  
Interest Rate Risk ◽  
Global Banking ◽  
The World ◽  
The Face ◽  
The Russian Federation

In the face of the COVID-19 pandemic world banking system is being severely tested. The last time such shocks occurred during the global fi nancial crisis of 2008–2009. However, the crisis of the global banking system in 2020 caused by the COVID-19 pandemic is very diff erent from the global fi nancial crisis of 2008–2009. During the previous global fi nancial crisis, central banks around the world were able to cut key rates to stimulate the aff ected economy, while the current crisis is taking place in conditions of extremely low and even negative key rates. Consequently, the central banks of the economically developed countries of the world lack one of the most eff ective tools to stimulate the economy in the face of a global crisis. Since the maximum income of commercial banks is generated by the operation of high key rates, the downward trend in recent years is a serious risk to the business of commercial banks. The article analyses the dynamics of key rates in the economically developed countries of the world in comparison with China and the Russian Federation, based on the results of this document, the main trends and patterns were identified, the most dangerous risks for commercial banks are shown. Besides the article discusses the modern conceptual provisions of interest rate risk management in commercial banks of the Russian Federation. They form the basis for the development of constructive methods for assessing commercial risk and the formation of managerial decisions that ensure its prevention or reduction of negative consequences in the event of the implementation of risk events that determine it.

scholarly journals Impact of Macroeconomic and Bank Specific Variables on Spread of Interest Rate: A Study of Listed Commercial Banks in Bangladesh

2020 ◽  
pp. 148-156
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking System ◽  
Money Market ◽  
High Interest Rate ◽  
High Interest ◽  
Income Sources ◽  
Interest Rate Spread ◽  
The Difference ◽  
Indirect Impacts

The Banking system of a country provides the lifeblood to the efficient and effective functioning of an economy. Therefore it is crucial to understand the lending and borrowing rates and hence the spread of interest rates in the banking and financial sector. The Spread of Interest rate is the difference between loan rates and the deposit rates of a bank. High-interest rate reflected in the spread of a high-interest rate will immensely disrupt and cause adverse consequences in the whole economy. Both the spread of interest rate and the interest margin show that the intermediation cost is higher in Bangladesh. High-interest margins in a banking system are indicative of deep-rooted symptoms of inefficiency, absence of competition, non-diversification of income sources, and skewed development of money and capital market in favor of banks’ lending and inflexibility of rate adjustments symmetrically in response to market changes. Moreover, a frequent financial scam in Bangladesh has added more troubles in the money market of Bangladesh. For example, Hallmark scam of almost 4000 crore taka of Sonali Bank, a financial scam of Abdul Mannan, CEO of BIFC, amounted to around 950 crore taka, around 4500 crore taka scam of Janata bank and Agrani bank have made our money market and financial market susceptible to failure. These events have some direct or indirect impacts on interest rates. Hence, I have felt the importance of identifying the determinants of the spread of interest rates. Understanding the determinants of the spread of interest rates would enable us to eliminate such unnecessary costs in financial intermediation, which would be the result in operational and administrative efficiency, resulting in financial viability, stability, and economic growth. Therefore, we need to know the determinants of the spread of interest rates. Hence, I have been motivated to study the determinants of interest rate spread and their extent of impacts on interest rate spread.

scholarly journals One Central Bank to Rule Them All*

2019 ◽  
Author(s):  
Francesca Brusa ◽  
Pavel Savor ◽  
Mungo Wilson
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Central Banks ◽  
Comparable Result ◽  
Global Markets ◽  
Open Market ◽  
Federal Open Market Committee ◽  
The Difference ◽  
Global Stock Markets ◽  
Global Stock

Abstract While global stock markets enjoy high returns on days surrounding Federal Open Market Committee (FOMC) meetings, there is no comparable result for other central banks either internationally or, more surprisingly, domestically. Neither announcement surprises nor currency moves drive these findings, which hold even for stocks with a domestic focus. The difference in announcement premia is not explained by economy size, exposure to multinationals, or policy activism. We conclude that the Fed exerts a unique impact on global equities. Consistent with this hypothesis, uncertainty drops across global markets following FOMC announcements but not those of other central banks. Furthermore, the Fed is generally the leader among central banks in setting monetary policy.

scholarly journals Monetary Policy Response in the Republic of North Macedonia and the Republic of Albania for Coping with the Pandemic COVID-19 in 2020

2021 ◽  
Vol 7 (1) ◽  
pp. 77-88
Author(s):  
Alba Pollozhani ◽  
Shenaj Hadzimustafa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Banks ◽  
Open Market ◽  
Macroeconomic Policies ◽  
Monetary Policies ◽  
Creative Commons ◽  
Interest Rate Volatility ◽  
The Republic ◽  
Reserve Ratio

This study aims to analyse how the monetary policies of the Republic of North Macedonia and the Republic of Albania, as one of the two critical macroeconomic policies, have reacted in response to COVID-19 for the year 2020. Last year, the year 2020, the pandemic caused these two countries to react through monetary policy. This research examines how central banks of both countries have changed traditional monetary policy tools for tackling the pandemic, starting with open market operations, required reserve ratio, the overnight loans interest rate, and the available deposits interest rate. The research continues with analyzing whether they were used and what non-traditional tools were applied in that period. The study analysis concludes which monetary policies have been pursued in the Republic of North Macedonia and the Republic of Albania, whether there have been non-traditional tools and how the scope for interbank interest rate volatility has changed. Our study revealed that both countries had pursued an expansive monetary policy, there were also non-traditional tools, and the scope for interbank interest rate volatility has shifted towards narrowing. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

4. The central bank and the conduct of monetary policy

2016 ◽  
pp. 54-71
Author(s):  
John Goddard ◽  
John O. S. Wilson
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Banking Industry ◽  
Banking System ◽  
Central Banks ◽  
National Currency ◽  
The Uk ◽  
The International Monetary Fund

In most countries, the central bank manages the country’s money supply and interest rates. Most central banks hold a monopoly over printing the national currency and have supervisory or regulatory responsibilities for overseeing the banking industry. The central bank typically performs a dual role, operating as the government’s banker, and as banker to the rest of the banking system. ‘The central bank and the conduct of monetary policy’ explains the central bank’s role and describes the central banks of the UK, EU, and US, as well as the International Monetary Fund. It also outlines the central bank’s responsibility for implementing monetary policy and explains the deposit expansion multiplier, interest rate targeting, and quantitative easing.

Consequences of a High Interest Rate Policy in the Process of Disinflation. The Case of Poland

1998 ◽  
Vol 9 (1) ◽  
pp. 15-31 ◽  
Author(s):  
Alojzy Z. Nowak ◽  
Kazimierz Ryć ◽  
Jerzy Żyżński
Keyword(s):  
Interest Rate ◽  
Banking Sector ◽  
Banking System ◽  
Research Programme ◽  
Open Market ◽  
High Interest Rate ◽  
Interest Rate Policy ◽  
The Real ◽  
High Interest ◽  
Rate Policy

The aim of the article is to analyse the consequences of a high interest rate policy pursued in Poland since 1990 in the process of disinflation. The interest rate was the main instrument of monetary policy in a situation when the economy lacked a money market on which the money supply could be influenced directly by open market operations. The application of a high interest rate had many unfavourable consequences both in the real sphere and in the financial sphere. The most important of these consequences in the real sphere was that it forced self-financing on the part of enterprises, the ineffective allocation of resources, delays in carrying out investments, the cyclicity of demand; the effects in the financial sphere mainly concern the banking sector, where the assets of the banking system become distorted, while for enterprises the most important consequences result from the high cost of credit, which increases costs and reduced the competitiveness of enterprises dependent on credit. The authors analyse these consequences and formulate hypotheses and a research programme for testing them.

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