monetary
purchase
BANKING: Assets -100 securities, +100 reserves
CB: Assets: +100 securities, +100 reserves
sale
BANKING: Assets: +100 securities, -100 reserves
CB: Assets: -100 securities, Liabilities: -100 reserves
Delta D
Delta D = (1/r)*delta R
m
m = (1+c)/(r+e+c)
M2 = C + D + T + MMF
C: Currency in circulation
D: Checkable deposits
T; Time and savings deposits
MMF: Money Market Mutual Fund shares + Money Market deposit accounts, plus overnight RPs + Overnight Eurodollars
Ratios
c = C/D
t = T/D
mm = MMF/D
FFR Target
Inflation rate + Equilibrium real FFR + 1/2(inflation gap + output gap)
Taylor principle
The principle that the monetary authorities should raise nominal interest rate by more than the increase in the inflation rate has been named the Taylor principle