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What happens with liquidity provision in normal market conditions? 学び始める
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liquidity insurance operations provide temporary, short-term assistance to commercial banks; there is no medium-term funding; interest rates are kept at a balanced, relatively low levels.
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What happens with liquidity provision during credit crunch? 学び始める
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the liquidity in the banking sector diminishes leaving banks prone to credit contraction; there is risk of insolvency or even bank runs; the maintenance of financial intermediation and stability of the whole financial system is in jeopardy.
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Which objectives conflict with each other? 学び始める
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financial stability and inflation targets
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How banks increase effectiveness of their actions? 学び始める
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by; actively adjusting existing channels to rapidly changing conditions; introducing liquidity through new tools within existing channels; using new, more direct channels of policy transmission.
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Maximum of new arrangememnts was introduced by (name 3 countries) 学び始める
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Minimum of new arrangements was introduced by (name 3 countries) 学び始める
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Georgia, Moldova, Estonia
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What new arrangements for liquidity provision do we recognise? 学び始める
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Systemic liquidity arrangements, Direct instruments in money markets, Securities liquidity provision, Quantitative easing, Credit easing
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What are systemic liquidity arrangements? 学び始める
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were aimed at injecting liquidity into the financial system when conventional monetary transmission channels were blocked.
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What are direct instruments in money markets? 学び始める
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They were also introduced because of the market-based policy channels impairment, but novelty here was limited to changing the parameters of the liquidity frameworks.
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What is Securities liquidity provision? 学び始める
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it consisted of swapping illiquid private sector securities owned by central banks’ counterparties for liquid government securities (new risks)
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What is Quantitative easing? 学び始める
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It involved direct purchases of financial assets. Its key aim was to lower the benchmark yield curve and boost economic activity. It is almost always used when the policy interest rates are closing to zero.
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学び始める
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It involves direct or indirect provision of credit by the central bank to targeted borrowers and becomes necessary in case of the credit markets breakdown. Most often its aim is to reduce credit spreads in sectors of high macroeconomic importance.
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