Traditional Culture Encyclopedia - Traditional culture - Compared with the legal reserve and discount window, open market operations have the superiority of what

Compared with the legal reserve and discount window, open market operations have the superiority of what

Legal reserve, is the law requires financial institutions must be present in the central bank, this part of the funds called legal reserve. It is a system whereby the central bank controls the size of the commercial bank's credit. The central bank controls the level of commercial bank reserve ratio affects the size of the bank's credit.

Discount window, is the central bank to the bank open to provide a limited and only to meet its temporary liquidity needs of the business, generally for the bank's last funding channel, the bank to short-term treasury bills, government bonds and commercial loans, etc. as collateral from the central bank to borrow funds.

Open market operations, is the central bank throughput base currency, regulating market liquidity of the main monetary policy tools, through the central bank and the designated dealers for securities and foreign exchange transactions, to achieve monetary policy control objectives.

Compared with the former 2, open market operation is more active, flexible, and at the same time can quickly have an impact on the market, that is, there is a strong timeliness, and more market-oriented.

From: Tongchengbills.com