Monetary Control Instruments and Financial Reform

Wilbert O. Bascom
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Wilbert O. Bascom: State of Florida

Chapter 4 in The Economics of Financial Reform in Developing Countries, 1994, pp 37-52 from Palgrave Macmillan

Abstract: Abstract Monetary control in repressed financial markets is direct. Central banks in these markets have the authority to administer the level of interest rates and allocate credit. When financial markets are liberalized, monetary control is mainly indirect and the monetary control instruments are those used by the central bank to change the reserves of the banking system. Changes in these reserves affect the cost and availability of credit and the money supply. Further, the indirect or market-based system of monetary control relies mainly on the central bank’s ability to manage its own balance sheet and to set the conditions under which it is willing to provide assistance to the banking system in the event of reserve shortages.

Keywords: Interest Rate; Central Bank; Foreign Exchange; Commercial Bank; Money Supply (search for similar items in EconPapers)
Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-23372-4_4

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DOI: 10.1007/978-1-349-23372-4_4

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