Monetary Policy Implementation: A Microstructure Approach

Perry Mehrling and Neil T. Skaggs

Chapter 10 in David Laidler’s Contributions to Economics, 2010, pp 212-234 from Palgrave Macmillan

Abstract: Abstract In classic central banking theory, the ‘discount house’ played a central role (Bagehot, 1873, Sayers, 1976).1 As holders of short-term commercial bills, the discount houses financed the holding of goods on their way from producers to consumers, and, in turn, financed themselves primarily by borrowing from banks. Just so, an expansion of trade went hand in hand with an expansion of both the assets and liabilities of the discount houses, and also an expansion of both the assets and liabilities of the banking system. Looking through the balance sheet relationships, it was clear to observers that the expansion of trade was financed by an expansion of bank money, meaning the deposit liabilities of the banking system.

Keywords: Monetary Policy; Central Bank; Balance Sheet; Federal Reserve; Money Market (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1057/9780230248410_10

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