TARGETING OF KEY INTEREST RATE
67
vol. 2, 2012
TARGETING OF KEY
INTEREST RATE
AS A SOURCE OF CRISIS
YANA SOKOLOVA
St. Petersburg State University, Faculty of Economics, Russia
Abstract
In response to the world economic crisis of 2008 the authorities of many countries have launched policies of interest rate reduction through large-scale asset purchases on the open
key rate targeting. The author explains how changes of the federal funds rate increased bank interest rate risk and provoked the recession of 2007-2009. The results of this paper show that institutions. Keywords: commercial bank.
1. Introduction
countries were triggered by the mortgage crisis and stock market crash in the United States.
These facts are indeed undeniable and have become the part of economic history, but one very reliable banks to rush into such risky undertakings as sub-prime lending and investing huge amounts of assets in mortgage-backed securities? Of course, we could say that the bankers just made a mistake; however, the idea of mass delusion of highly skilled specialists seems
the Federal Reserve System.
One of the basic instruments of central bank monetary policy is steering the short-term money market rate with the help of open market operations. In the United States, this rate is called the federal funds rate and in the Eurozone,
68
interest rate is a powerful instrument of monetary policy. The objective of this paper is to study kind of monetary policy. To reach the established objective, the following research methods observation and aggregation.
2. Literature review th government and central bank enables to conduct monetary policy. Literature review shows that over the period of the history there were a lot of advocates and opponents of key interest rate
Economists that came to the agreement for the general question had different opinions established it should be brought to the determinate size by open market operations. However,
against of monetary
vol. 2, 2012
TARGETING OF KEY
INTEREST RATE
AS A SOURCE OF CRISIS
YANA SOKOLOVA
St. Petersburg State University, Faculty of Economics, Russia
Abstract
In response to the world economic crisis of 2008 the authorities of many countries have launched policies of interest rate reduction through large-scale asset purchases on the open
key rate targeting. The author explains how changes of the federal funds rate increased bank interest rate risk and provoked the recession of 2007-2009. The results of this paper show that institutions. Keywords: commercial bank.
1. Introduction
countries were triggered by the mortgage crisis and stock market crash in the United States.
These facts are indeed undeniable and have become the part of economic history, but one very reliable banks to rush into such risky undertakings as sub-prime lending and investing huge amounts of assets in mortgage-backed securities? Of course, we could say that the bankers just made a mistake; however, the idea of mass delusion of highly skilled specialists seems
the Federal Reserve System.
One of the basic instruments of central bank monetary policy is steering the short-term money market rate with the help of open market operations. In the United States, this rate is called the federal funds rate and in the Eurozone,
68
interest rate is a powerful instrument of monetary policy. The objective of this paper is to study kind of monetary policy. To reach the established objective, the following research methods observation and aggregation.
2. Literature review th government and central bank enables to conduct monetary policy. Literature review shows that over the period of the history there were a lot of advocates and opponents of key interest rate
Economists that came to the agreement for the general question had different opinions established it should be brought to the determinate size by open market operations. However,
against of monetary
References: (2000-2012). Retrieved from Large-Scale Asset Purchases.