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The Federal ReserveWhat Everyone Needs to Know$
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Stephen H. Axilrod

Print publication date: 2013

Print ISBN-13: 9780199934485

Published to Oxford Scholarship Online: September 2013

DOI: 10.1093/acprof:oso/9780199934485.001.0001

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Instruments of Monetary Policy

Instruments of Monetary Policy

(p.41) 4 Instruments of Monetary Policy
The Federal Reserve

Stephen H. Axilrod

Oxford University Press

This chapter discusses the Fed's monetary instruments. It looks at how the Fed's monetary instruments are employed in the policy process, which of the Fed's instruments are most significant for implementing policy, how open market operations are employed in policy implementation, and how the federal funds rate connects with money market conditions in general. It considers how the funds rate decisions affect other credit markets and how key borrowers respond to changed market conditions. In addition, it asks: how do Federal Open Market Committee policy decisions adapt to market uncertainties? How do open market operations avoid creating too much money and inflation? And does the money market itself influence spending or is it mostly a policy conduit? Perhaps the Fed's powers are also used to influence the government securities market.

Keywords:   Federal Reserve System, monetary instruments, monetary policy, open market operations, policy implementation, money market, federal funds, Federal Open Market Committee, government securities market

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