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The Scope of Monetary Policy Actions Authorized Under the Federal Reserve Act
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David H. Small
Published/Copyright:
April 8, 2005
Abstract
The Federal Reserve Act authorizes the Federal Reserve to undertake various types of discount window loans and open market operations. While the Federal Reserve generally has not found it necessary to use all types of such authority, there could be circumstances in which the Federal Reserve might need to consider utilizing its statutory authority more broadly than it has in the past.We examine the limits imposed by the Federal Reserve Act along two dimensions: those types of counterparties and financial instruments with which the Federal Reserve may conduct monetary policy. In doing so, we develop a theme not commonly pursued in the literature -- the ways and extent to which the Federal Reserve Act limits the Federal Reserve from taking credit risk onto its balance sheet.We also provide some historical perspective on how the current powers of the Federal Reserve came to be authorized.
Published Online: 2005-04-08
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Keywords for this article
Monetary policy;
Federal Reserve Act;
discount window;
open market operations
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- The Great Inflation of the Seventies: What Really Happened?
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- Hiccups for HIPCs? Implications of Debt Relief for Fiscal Sustainability and Monetary Policy
- The Effects of Reducing Firing Costs in Spain: A Lost Opportunity?
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