Central Bank of the West for many years in the three policy instruments, ie, the statutory deposit reserve ratio, open market operations and rediscount policy, the three traditional policy tools are sometimes referred to as "three magic weapons", primarily for regulating the Currency volume.
Three traditional tools of monetary policy effects and limitations:
⑶ open market operations: the central bank in the financial securities traded on the open market, in order to regulate the market behavior of the money supply policy. Results: ① motivated, it can initiate action in accordance with policy objectives; ② high flexibility, trading volume, the flexibility to control the direction; ③ moderate control effect and vibration of small; ④ spread wider. Limitations: ① the central bank must have a strong enough intervention and control of the financial strength of financial markets; ② have a well-developed, sophisticated financial markets, and markets must be national, full range of securities on the market and achieve a certain scale ; ③ must have the cooperation of other policy tools. |
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