Tiền tệ ngân hàng FTU - Lý thuyết chương 9

Content • Introduction • The central bank’s balance sheet • The central bank’s assets • The central bank’s liabilities • The monetary base • Control of the monetary base • Other factors affecting the monetary base • Deposit creation • Deposit creation at a single bank • Deposit creation in a system of banks Lecture 9 The Money Supply Process 2 Content Readings • Mishkin (2021), The Economics of Money, Banking, and Financial Markets, 13th edition, Pearson, Chapter 15 • Critique of the simple model • The money multiplier • Factors affecting the quantity of money • The money multiplier and the Great Depression • The money base and money multiplier, 2007 – 2010 • The limits on the central bank’s ability to control the quantity of money • Cecchetti and Schoenholtz (2010), Money, Banking, and Financial Markets, 3rd edition, McGraw-Hill, Chapters 17 3 4 Introduction Introduction • During the September 11, 2001 crisis, the financial community was on the edge of a system-wide collapse. • Because of the immediate action of the Fed officials, the financial system held together, and most of us never realized how close we came to catastrophe. • This was one of the greatest successes of modern central banking. • The financial system, one of the terrorists’ primary targets, returned to near normal within weeks. • Many of the Fed’s actions in the crisis of 2007-2009 were unprecedented or ahad not been seen since the 1930s. • For the first time since the Great Depression, the Fed lent to nonbanks and even to nonfinancial companies. 5 6 Introduction Introduction • During the Great Depression, Fed officials didn’t fully understand how their actions affected the supply of credit in the economy. • The financial system collapsed because Fed officials had failed to provide the liquidity that sound banks needed to stay in business. 7 • We need to understand how the central bank interacts with the financial system. • What is it that central banks buy and sell? • What are the assets and liabilities on their balance sheets? • How do they control those assets and liabilities, and why might they want to hide them from the public? • How is the central bank’s balance sheet connected to the money and credit that flow through the economy? • Where do the trillions of dollars in our bank accounts actually come from? 8 The Central Bank’s Balance Sheet The Central Bank’s Balance Sheet • We will focus on a stripped-down version of the balance sheet. • These are the major assets and liabilities that appear in every central bank’s balance sheet in one form or another • There are numerous financial transactions leading to changes in the central bank’s balance sheet. • The structure of the balance sheet gives us a window through which we can study how the institution operates. • Central banks publish their balance sheets regularly. The central bank’s balance sheet Assets – Publication is a critical part of the transparency that makes monetary policy effective. Liabilities Government securities Reserves of foreign currency Currency in circulation Government’s account Discount loans Bank reserves 9 10 The Central Bank’s Balance Sheet The Central Bank’s Balance Sheet • The central bank’s balance sheet shows three basic assets: 1. Securities are the primary asset of most central banks. – Securities, – Foreign exchange reserves, and – Loans. • The first two are needed so that the central bank can perform its role as the government’s banks. • The loans are a service to commercial banks. – Traditionally, central banks exclusively held Treasury securities, which are virtually free of default risk. – During the 2007-2009 crisis, some central banks chose to acquire a variety of risky assets. – The quantity of securities it holds is controlled through purchases and sales known as open market operations. 11 12 The Central Bank’s Balance Sheet The Central Bank’s Balance Sheet 3. Loans are usually extended to 2. Foreign exchange reserves are the central bank’s and government’s balances of foreign currency. commercial banks. – These are held in the form of bonds issued by foreign governments. – These reserves are used in foreign exchange interventions, when officials attempt to change the market values of various currencies. – In 2008 and 2009, the Fed made substantial loans to nonbanks as well. • Discount loans are the loans the Fed makes when commercial banks need short-term cash. • Through its liquid securities holdings the Fed controls the federal funds rate and the availability of money and credit. 13 14 The Central Bank’s Balance Sheet • On the liabilities side of the central bank’s balance sheet, we see three major entries: – Currency, – The government's deposit account, and – The deposit accounts of the commercial banks. • The first two items allow the central bank to perform its role as the government’s bank, while the third allows it to fulfill its role as the bankers’ bank. 15 16 The Central Bank’s Balance Sheet The Central Bank’s Balance Sheet 2. Government’s account. Governments need a 1. Currency. Nearly all central banks have bank account like the rest of us. a monopoly on the issuance of the currency used in everyday transactions. – The central bank provides the government with an account into which the government deposits funds (mostly tax revenue) and from which the government makes payments. – By shifting funds between its accounts at commercial banks and the Fed, the Treasury usually keeps its account balance at the Fed fairly constant. – Currency circulating in the hands of the nonbank public is the central bank’s principal liability. 17 The Central Bank’s Balance Sheet The Central Bank’s Balance Sheet 3. Commercial Bank accounts (reserves). – Commercial bank reserves are the sum of two parts: • • 18 Deposits at the central bank, plus The cash in the bank’s own vault. – In the same way that you can take cash out of a commercial bank, the bank can withdraw its deposits at the central bank. • Vault cash is part of reserves. – Reserves are assets of the commercial banking system and liabilities of the central bank. 19 • While banking system reserves usually aren’t the central bank’s largest liability, they are the most important in determining the amount of money in the economy. • Central banks run their monetary policy operations through changes in these reserves. • There are two types of reserves. • Required reserves that banks must hold, and • Excess reserves, which banks hold voluntarily. 17-20 • The Fed’s response to the crisis of 2007-2009 transformed the size and composition of its assets and liabilities in unprecedented fashion. • The Fed’s actions helped to prevent a repeat of the plunge of the money supply and nominal GDP that occurred in the Great Depression. • The following table contrasts the balance sheet at an early state in the crisis with that after the worst of the crisis has passed. 21 22 Importance of Disclosure • Every central bank publishes a statement of the bank’s own financial condition. • Without public disclosure of the level and change in the size of foreign exchange reserves and currency holdings, it is impossible for us to tell whether the policymakers are doing their job properly. 23 24