Central Banks

What you'll learn

• ✓Name the Fed / ECB / BoJ mandates
• ✓Describe open market operations
• ✓Explain the policy rate transmission chain

Lessons

1. 🚌
   Who's Driving the Bus?

   March 2020, one weekend, no warning
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2. The Mandates

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3. The Policy Rate, Up Close

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4. How They Actually Enforce the Rate

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5. When the Rate Hits Zero

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6. Final Boss: Run the Central Bank

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Sources

All content is drawn from the sources below. We deliberately avoid unverified material.

• Conducting Monetary Policy
  Federal Reserve Board · institutional
  Authoritative overview of FOMC, open market operations, the discount window, and reserve requirements.
  https://www.federalreserve.gov/monetarypolicy.htm
• FOMC statement, March 15, 2020 (emergency rate cut to 0 to 0.25 percent)
  Federal Reserve Board · institutional
  Backs the lesson 1 hook on the March 2020 emergency cut.
  https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm
• FOMC statement, March 23, 2020 (open-ended Treasury and MBS purchases)
  Federal Reserve Board · institutional
  Source for the 'unlimited QE' claim used in lesson 1.
  https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323a.htm
• ECB Monetary Policy Strategy Statement (2021 review)
  European Central Bank · institutional
  Source for the ECB primary mandate and 2 percent symmetric inflation target.
  https://www.ecb.europa.eu/home/search/review/html/ecb.strategyreview_monpol_strategy_statement.en.html
• Federal Reserve Reform Act of 1977 and the dual mandate
  Federal Reserve History · institutional
  Legal source for the Fed's dual mandate of price stability and maximum employment.
  https://www.federalreservehistory.org/essays/federal-reserve-reform-act-of-1977
• Quantitative and Qualitative Monetary Easing (QQE), Bank of Japan
  Bank of Japan · institutional
  BoJ's own description of QQE under Governor Kuroda from 2013, used in lessons 2 and 5.
  https://www.boj.or.jp/en/mopo/outline/qqe.htm
• The Federal Reserve and the Financial Crisis (2013 Princeton lectures)
  Princeton University Press / Ben S. Bernanke · book
  Reference for QE as a swap of bonds for reserves and not direct money transfers, used in lesson 5.
• Lombard Street: A Description of the Money Market (1873)
  Walter Bagehot, Henry S. King · book
  Origin of the lender of last resort doctrine referenced in lesson 6.
• Verbatim of the remarks made by Mario Draghi, Global Investment Conference, London, 26 July 2012
  European Central Bank · institutional
  Source for the 'whatever it takes' speech used in lessons 2 and 5.
  https://www.ecb.europa.eu/press/key/date/2012/html/sp120726.en.html
• Paul Volcker and the Great Inflation
  Federal Reserve History · institutional
  Backs the 1979 to 1981 Volcker rate hikes above 19 percent and the credibility argument in lesson 2.
  https://www.federalreservehistory.org/essays/anti-inflation-measures
• Money creation in the modern economy (2014, Q1 Bulletin)
  Bank of England · institutional
  Reinforces the QE-vs-money-printing distinction in lesson 5.
  https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy