Lesly Castillo
August 29, 2012
Discussion Board 4

Describe when and why central banks buy either their own currency or the currency of another nation in an effort to control exchange rates.
Central Banks has control over monetary policy. Monetary policy has three steps such as: open market operations, change in reserve requirements, and changes in the discount rate. Central bank can expand the money supply by the following; the discount rate is being reduced, Reduction in reserves requirements and bonds being purchased. However, Central bank can contract the money supply by: Discount rate being increased, Increasing reserves requirements, and selling of bonds. Central Banks buy currency because it affects the supply of money. Many central banks may require that most foreign exchange receipts (generally from exports) be exchanged for the local currency. The bank is marked-based the local currency being purchased by the rate being used. Money supply is increased by the central bank when it purchases the foreign currency by selling the local currency. The central bank may reduce the money supply by many reasons which include selling bonds or foreign exchange interventions.

What did the central banks do to stabilize the financial systems in 2007&2009?
Monetary policy had been eased, with policy interest rates approaching zero in many countries and quantitative easing being attempted by a number of central banks. The Federal Reserve and other central banks developed new facilities to assist stabilize the credit markets. Some major countries recognize the need to coordinate their debt issuance so as not to de-stabilize the financial markets.
In an effort to stabilize the financial system how much money, in U.S. dollar equivalent and as a percentage of the country's GDP, did the European Central Bank, Bank of England, Bank of China, and the Federal Reserve put