Lecture 9 Structure and function of Central bank

Lecture 9: Structure and function of Central bank (Federal reserve) l The lecture’s aim is to make the students understand how the Federal reserve is formed and structured. ¡ Monetary tools and policies that used by the Federal reserve to affect the money supply. ¡ 2 types of central bank: dependence and independence. ¡

9. 1 Structure of Federal reserve Board of governors, financial advisers. Location of 12 Federal reserve banks Federal open market committee

9. 1 (cont) l Question: What do you know about Federal reserve chairman? How long can Fed chairman serve in his term? l http: //www. youtube. com/watch? v=2 Xc. Cb 1 G 8 h. C 8 (Bernanke)

9. 2 Monetary tools used by Fed reserve. Board of governors, financial advisers. decide Review and decide Location of 12 Federal reserve banks Federal open market committee suggest decide Reserve requirement Open market operation Discount rate

9. 3 Types of the central bank l Dependent central banks? l Independent l What central banks? kind of central bank is Fed, dependent or independent?

9. 4 Independent status of other central banks

9. 4 (example) l http: //www. youtube. com/watch? v=7 i. Paiyl. U YW 0 (how the UK government make decision on monetary policy and its tools. )

9. 5 Advantages and disadvantages of independent central banks. l Advantages ¡ ¡ Have a long term goals and objectives Less be affected or influenced by politicians or president l Disadvantages ¡ ¡ responsibility of Fed chairman become too big. May not be able to coordinate monetary policy with fiscal policy.

9. 6 Do you support an independent or dependent central banks?