【正文】 anking (moary) policy. ? To understand the concept of legal reserves and how the Federal Reserve System influences the level and growth of legal reserves. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 5 Introduction ? A central bank is a government agency that monitors the operation of its financial system and controls the growth of its money supply. ?Central banks are “bankers’ banks.” They municate with mercial banks and securities dealers in carrying out their essential public policy functions. ? The . central bank is the Federal Reserve System. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 6 The Roles of Central Banks ?Control of the money supply, which is closely linked to economic activity and price inflation ?Stabilizing the money and capital markets, by fostering their development and ensuring a stable flow of funds through them ?Lender of last resort for financial institutions squeezed by severe liquidity pressures ?Supervisor of the banking system ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 7 The Roles of Central Banks ?Maintaining and improving the payments mechanism a smoothly functioning and efficient payments mechanism is vital for business and merce ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 8 The Goals of Central Banking ? Central banking in the . and in most other nations is directed toward four major goals: ?Full employment of resources ?Reasonable stability in the general price level of all goods and services ?Sustained economic growth ?A stable balanceofpayments position for the nation vis224。 growth of the money supply Market value of the public’s security holdings Currency exchange rates Public expectations regarding security prices, interest rates, currency prices, money supply amp。 A cce p t a n ce sT re a s u ry Bi l l sC e rt i f i ca t e s o f D e p o s i t? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 59 Investors in Acceptances ? Investors in acceptances include banks, industrial corporations, money market mutual funds, local governments, federal agencies, and insurance panies. ? To many investors, acceptances are a close substitute for Treasury bills, negotiable CDs, or mercial paper in terms of quality, although the acceptance market is far smaller in terms of the volume of trading. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 60 Eurocurrency Deposits ? The Eurocurrency market has arisen because of the tremendous need worldwide for funds denominated in dollars, Euros, pounds, and other relatively stable currencies. ? The Eurocurrency market represents the largest of all money markets worldwide, with total funds probably in excess of $4 trillion. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 61 Eurocurrency Deposits ? Eurodollars are deposits of . dollars in banks located outside the . ? The large majority of Eurodollar deposits are held in Europe, although Europe’s share of the total is declining. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 62 Eurocurrency Deposits ? Eurodollars and other Eurocurrency deposits are continually on the move in the form of loans. ? They are employed to finance the import and export of goods, to supplement government tax revenues, to provide working capital for the foreign operations of multinational corporations, and to provide liquid reserves for the largest banks. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 63 Eurocurrency Deposits ? When a dollar deposit is moved to a bank located outside the ., that bank then holds claim to the original dollar deposit in the . ? When a Eurodollar loan is made, the borrower receives a claim against dollars deposited in . banks. ?Funds are merely passed from one . bank to another. The total amount of dollar deposits and . bank reserves remains unchanged. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 64 Eurocurrency Maturities and Risks ? Most Eurocurrency deposits are shortterm deposits ranging from overnight to one year, although a small percentage are longterm time deposits. ? Eurocurrency deposits are known to be volatile and highly sensitive to fluctuations in interest rates and currency prices. They also carry political risk and default risk. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 65 The Supply of Eurocurrency Deposits ?Eurocurrency deposits e from … ? foreign investment ? tourism ? balance of payments (trade) settlements ? interbank funds ? government funds ?large corporations’ cash balances ? central banks supplying or absorbing funds from the banking system ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 66 Eurodollars in . Domestic Bank Operations ? Since the late 1960s, . banks have drawn heavily on Eurodollar deposits as a means of adjusting their domestic reserve positions. ? Eurodollars usually carry higher reported interest rates than many other sources of bank reserves. However, there are fewer legal restrictions on the borrowing of Eurodollars. ? . banks also aid their customers in acquiring Eurocurrency deposits and loans. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 67 Interest Rates on Eurodollar Deposits 33 . 544 . 555 . 566 . 51991 1993 1995 1997 1999 2020T re a s u ry Bi l l sC e rt i f i ca t e s o