DQ#1: What new measures and tools has the Federal Reserve employed in the past 2 years that have not been employed in the past 2 decades? In researching information to answer this question, I learned that there are 12 Federal Reserve Districts or Banks (I didn’t know this) and 25 branches. Each region works with the others to establish control for the entire country. The leadership for the System is called the Board of Governors and it is located in Washington D.C. (Federal Reserve, 2011). It is their job to create and guide monetary policy, to analyze domestic and international economics and financial conditions, and to lead committees that study current issues (Federal Reserve, 2011). Due to the recent economy, the Federal Reserve has begun new measures and tools in the last couple of years. According to Chairman Ben Bernanke (2011) these tools can be divided into three groups. These groups are: the lending to financial institutions, providing liquidity to key credit markets, and purchasing longer-term securities (Federal Reserve of Cleveland, 2011). As a result of these new tools the Federal Reserve is able to extend credit and purchasing securities. This “credit easing” uses the balance sheet by changing both the absolute level of the balance sheet as well as the types of assets it contains (Federal Reserve of Cleveland, 2011). They use the Fed’s authority to extend credit or purchase and can supplement traditional monetary policy tools by changing the mix of assets it holds (Federal Reserve of Cleveland, 2011). This is different from the approach used by the Bank of Japan to generate policy actions, these tools focus on the mix of assets (Federal Reserve of Cleveland, 2011). Federal Reserve (2011) Federal Reserve education. Retrieved: http://www.federalreserveeducation.org/
Federal Reserve Bank of Cleveland (2011)Credit easing policy tools Retrieved: http://www.clevelandfed.org/research/data/credit_easing/index.cfm
Federal Reserve Bank of San...
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