Английский язык для экономистов - Малюга Е.Н.
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In short, a potential cyclical asymmetry is at work. Monetary policy may be highly effective in slowing expansions and controlling inflation but largely ineffective in moving the economy from a recession or depression toward its full-employment output. This potential cyclical asymmetry, however, has not created major difficulties for monetary policy in recent eras. Since the Great Depression, higher excess reserves have generally translated into added lending and therefore into an increase in the money supply.
Changes in Velocity. Total expenditures may be regarded as the money supply multiplied by the velocity of money — the number of times per year the average dollar is spent on goods and services. If the money supply is $ 150 billion, total spending will be $ 600 billion if velocity is 4 but only $ 450 billion if velocity is 3.
Some economists feel that velocity changes in the opposite direction from the money supply, offsetting or frustrating policy-related changes in the money supply. During inflation, when the money supply is restrained Unit 10. Monetary and Fiscal Policy
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by policy, velocity may increase. Conversely, when measures are taken to increase the money supply during recession, velocity may fall.
Velocity might behave this way because of the asset demand for money. An easy money policy, for example, means an increase in the supply of money relative to the demand for it and therefore a reduction in the interest rate. But when the interest rate — the opportunity cost of holding money as an asset — is lower, the public will hold larger money balances. This means dollars will move from hand to hand — from households to businesses and back again — less rapidly. That is, the velocity of money will decline. A reverse sequence of events may cause a tight money policy to induce an increase in velocity.
Interest as Income. Monetary policy is based on the idea that expenditures on capital goods and interest-sensitive consumer goods are inversely related to interest rates. We must now acknowledge that businesses and households are also recipients of interest income. The size of such income and the spending which Hows from it vary directly with the level of interest rates.
Suppose inflation is intensifying and the Fed raises interest rates to increase the cost of capital goods, housing, and automobiles. The complication is that higher interest rates on a wide range of financial instruments (for example, bonds, certificates of deposits, checking accounts) will increase the incomes and spending of the households and businesses that own them. Such added spending is obviously at odds with the Fed's effort to restrict aggregate demand.
The point is this: For those who pay interest as an expense, a rise in the interest rate reduces spending, while a decline in the interest rate increases spending. But for those who view interest as income, a rise in the interest rate increases spending, while a decline in the interest rate reduces spending. The change in spending by interest-income receivers partly offsets and weakens the change in spending by purchasers of capital goods, homes, and autos.
Recent Focus: The Federal Funds Rate
In the past few years, the Fed has communicated its changes in monetary policy by announcing changes in its targets for the federal funds rate. (Recall that this rate is the interest rate which banks charge one another on overnight loans.) Statements by the Fed that it intends to increase the Federal funds rate suggest a "tighter" monetary policy is coming, while statements that it intends to reduce the Federal funds rate foret ell an "easier" monetary policy. Interest rates, in general, rise and fall with the Federal funds rate. 174
Английский ЯЗЫК ДЛЯ экономистов
The Fed does not set either the Federal funds rate or the prime rate; each is established by the interaction of lenders and borrowers. But because the Fed can change the supply of excess reserves in the banking system and then the money supply, it normally can obtain the market interest rates it desires. To increase the Federal funds interest rate, the Fed sells bonds in the open market. Such open-market operations reduce excess reserves in the banking system, lessening the excess reserves available for overnight loans in the Federal funds market. The decreased supply of excess reserves in that market increases the Federal funds interest rate. In addition, reduced excess reserves decrease the amount of bank lending and hence the amount of deposit money. We know that declines in the supply of money lead to increases in interest rates in general, including the prime interest rate.
In contrast, when the Fed wants to reduce the Federal funds rate, it buys bonds from banks and the public. As a result, the supply of reserves in the Federal funds market increases and the Federal funds rate declines.
The money supply rises because the increased supply of excess reserves leads to greater lending and creation of deposit money. As a result, interest rates in general fall, including the prime interest rate.
