...Transformations to Open Market Operations Doing business internationally is not the same as doing business at home. There are new skills to learn and new knowledge to acquire about the country that the company will be going into. The company will need to learn about the different laws and regulations, the different customer buying habits, and change the marketing strategies and materials to appeal to the new country the company is entering. It is important to remember that the way the company operate its business will be determined by culture of the market it’s entering, not ours. Understanding both the social and business culture in another country is the first key to success. Our world is becoming increasingly connected and global and the role of international business is increasing. Each country has its own set of unique customs and traditions. Each citizen’s beliefs define the cultures by which each citizen abides by in normal everyday life, serving as the very foundation of the country. For example, in Saudi Arabia a citizen convicted of stealing will have his had cut off. In the United States, a citizen convicted of stealing would possibly recieve only short term probation. The American Heritage Dictionary defines culture as, “The totality of socially transmitted behavior patterns, arts, beliefs, institutions, and all other products of human work and thought characteristic of a community of population.” Seemingly minuet gestures or situations which carry different...
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...the key elements of the framework that the Bank uses to implement its monetary policy. It also includes a table that lists the key features of the framework and how they function in the LVTS environment and a glossary of terms with respect to the Bank of Canada’s monetary policy operations. Policy overview The Bank of Canada establishes a target for the overnight interest rate within an operating band in order to influence other short-term interest rates and the exchange rate (Thiessen 1995). The ability to influence other short-term rates partly reflects the fact that inventories of money market securities are generally financed with overnight funds. However, other factors, including changing market expectations and exchange rate developments, also affect how other interest rates, including those with relatively short terms to maturity, respond to changes in the target rate. Changes in the Bank of Canada’s target for the overnight interest rate are the first stage in the transmission mechanism through which the monetary policy actions taken by the Bank affect total spending in the economy and, ultimately, inflation. In addition, the Bank could change its target rate to help stabilize financial markets in certain circumstances. Key features of the operating framework: The target for the overnight rate, the operating band, and...
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...Acting as banker to the central government * Operating monetary policy * Its general duties include: * Regulating credit and currency * Controlling and protecting the external value of the national monetary unit * Mitigating by its influence, fluctuations in the general level of production; * Promoting the economic welfare of Canada * The major functions of the Bank are * Acting for the government in the issuance of bank notes; * Acting as the government’s chief fiscal agent and financial advisor. As a fiscal agent, the Bank advises the government on financial matters; administers the deposit and fund accounts; manages international currency reserves and operates for the government in foreign exchange markets; acts as a depository for gold; and acts as the governments debt manager in issuing new debt securities and paying interest on them and retiring them * Conducting monetary policy, which is the banks most important function * Bank rate is the rate at which the bank of Canada is willing to lend short term funds to the chartered banks, in its role as lender of last resort. * The bank rate has been set equal to the ceiling of its target range for overnight money rates since 1996. *...
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...Scenario 1 In 150 to 200 words, explain your reasoning for the way you are planning on using Reserve Requirements. Be sure to address the following: 1. How Reserve Requirements affect the economy 2. How your action will affect economic growth 3. Why it is important to increase economic growth 4. Your rationale for the use of Reserve Requirements At the end of the game, you will be provided with this information to give to your instructor. Answer: The reserve requirements that affect the economy are the lower the amount that the reserve charges bank will in return lower rates and allow banks to be able to lend easier to a person or persons. By allowing credit to be obtained easier, it will allow the economy to slowly increase and come out of the recession. It is important to increase economic growth, because the economy cannot survive in a recession or an area that is in a direct standstill. I believe that the lowering the reserve requirements is the best option, because it allows the economy to start to turn around and come out of the recession. An economy that has come to a standstill or a recession will have to have an economic change or the economy will not be able to come out of the recession and thrive to its fullest potential. Scenario 2 In 150 to 200 words, explain your reasoning for the way you are planning on using the Discount Rate. Be sure to address the following: 1. How the Discount Rate can affect the economy 2. How your action will...
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...The New Central Bank Act (RA 7653) CHAPTER V FUNCTIONS AS BANKER AND FINANCIAL ADVISOR OF THE GOVERNMENT ARTICLE II - THE MARKETING AND STABILIZATION OF SECURITIES FOR THE ACCOUNT OF THE GOVERNMENT A. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES SECTION 117. Issue of Government Obligations. — The issue of securities representing obligations of the Government, its political subdivisions or instrumentalities, may be made through the Bangko Sentral, which may act as agent of, and for the account of, the Government or its respective subdivisions or instrumentality, as the case may be: Provided, however, That the Bangko Sentral shall not guarantee the placement of said securities, and shall not subscribe to their issue except to replace its maturing holdings of securities with the same type as the maturing securities. 117.1 Legislative History This is taken from Section 122 of Republic Act No. 265, with modification. Under RA No. 265, the issue of government securities by the Central Bank as fiscal agent of the Government was mandatory. In contrast, the use of the word “may” in Republic Act No, 7653 shows the intent to make the issue of such securities merely permissive and non-exclusive to the Bangko Sentral. ARTICLE II – REPUBLIC ACT NO. 265 CENTRAL BANK ACT OF 1948 Section 122. Issue of Government obligations. – The issue of securities representing obligations of the Government, its political subdivisions or instrumentalities, shall be made through the Central Bank...
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...th e paper observes the following 2 : • A temporary exogenous rise in the CBK’s REPO rate tends to be followed by a decline in prices and appreciation in th e nominal exchange rate, with effects culminating 9–12 months after the incipient shock. The im pact on output appears to be sluggish and small; and • Variations in the short-term interest rate account for ar ound one-third of the fluctuations in prices and half of the fluc tuations in the nominal exchange rate, while accounting for around 10 percen t of the output variation. The empirical findings suggest a weak transmis sion mechanism from monetary policy stance to real variables, likely refl ecting a slew of structural prob lems in the financial market, including inadequate financial infrastructure and weak lega l framework. On the other hand, there appears to be a strong li nk between monetary policy and nominal variables. A plausible transmission mechanism is as follows: a rise in interest rates associated with a tight monetary stance makes domestic assets more profitable vis-à-vis foreign assets, resulting in capital inflows, thereby exerting appreciating pressure on the exchange rate. Strengthening domestic currency in turn makes imports ch eaper, thereby easing inflation. This paper is organized as follows: Section II briefly describes th e institutional background and summarizes stylized facts about the Kenya n monetary economy; Sect ion III presents...
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...Journal of Financial Economics 64 (2002) 243–284 Liquidity risk and specialness$ Andrea Buraschia,*, Davide Meninia,b a London Business School, Institute of Finance, Sussex Place, Regents Park, London NW1 4SA, UK b Morgan Stanley, UK Received 11 July 2000; received in revised form 4 April 2001 Abstract Repo contracts, the most important form of collateralized lending, are widely used by financial institutions and hedge funds to create short-selling positions and manage their leverage profile. Moreover, they have become the primary tool of money management and monetary control of several central banks, including the Bundesbank and the newly born European Central Bank. This paper is an empirical study of this market. More specifically, we study the extent to which the current term structure of long term ‘‘special’’ repo spreads discount the future collateral value (specialness) of Treasuries. We ask whether repo spreads embed a liquidity risk premium and whether such a risk premium is time-varying. We quantify the size of the average liquidity risk premium and we provide empirical evidence of the extent of its time-variation. r 2002 Elsevier Science B.V. All rights reserved. JEL classification: G12; G13; G14; C22; C31; E43 Keywords: Liquidity risk; Treasury bonds; Repo contracts; Special repo rate; Expectation hypothesis; Treasury auctions The authors want to thank Federico Bandi, Ravi Bansal, Jacob Boudoukh, Mark Britten-Jones, Ian Cooper, Francesco Corielli, Mark Fisher...
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...Operation Market Garden took place during World War II between September 17th and 25th in 1944. It was fought in the Netherlands and Germany and was one of the largest airborne operations in history. The goal of Operation Market Garden was to secure the bridges across the rivers in Holland so that the Allied army could advance rapidly northwards into Germany, avoiding the Siegfried line. The plan consisted of two phases, codenamed: Market and Garden. Market consisted of airborne forces of the First Allied Airborne Army under the command of Lieutenant General Lewis Brereton to seize bridges and other terrain. Garden consisted of ground forces of the Second Army to move north led by XXX Corps under Lieutenant General Brian Horrocks. If all went as planned for the Allies the war was expected to end by Christmas 1944. General Bernard Montgomery thought up the plan for this operation in the summer of 1944. The main objective of this bold operation was to cross the Rhine River and advance into northern Germany. General Montgomery’s plan “involved the seizure of bridges in Holland by the 101st and 82nd US and 1st British Airborne Divisions. Then the British 30 Corps could advance over them and cross the Rhine and its tributaries”1. The bridges were located at Eindhoven, Nijmegen, and Arnhem ranging from thirteen to sixty-two miles away. If successful, the plan would free Holland and outflank Germany’s frontier defenses making an armored drive into Ruhr possible1. Market Garden was...
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...Aiming to grasp the concept of air mobility as a component of warfare, The United States Army created the 11th Air Assault Division (Test) at Fort Benning, Georgia in February 1963. The objective was to bring Infantry into battle as fast as possible using helicopters. In June 1964, Lieutenant Colonel Harold G. Moore, Jr., took command of one battalion of the 11th Air Assault Division, he trained them for over a year and by July 1965 the Pentagon gave the order to rename the 11th Air Assault Division as the1st Cavalry Division (Airmobile), including Lieutenant Colonel Moore´s 1st Battalion and its sister 2nd Battalion, which were deployed to Vietnam in July 28th 1965 according to the President´s order. This book relates the story of these two Battalions and their respective battles at Landing Zones X-Ray and Albany in the Ia Drang Valley. In just four days, more than two hundred Americans and thousands of North Vietnamese died in combat. The memories of those who fought and died in the Ia Drang Valley are brought to life throughout “We Were Soldiers Once ... and Young”. Both authors, Joseph L. "Joe" Galloway and Lieutenant General (Retired) Harold G. "Hal" Moore, are distinguished in their respective fields. Joe Galloway was a war correspondent for United Press International (UPI) from 1965 to 1966. He was attached to the 1st Battalion, 7th Cavalry and was present at Landing Zone X-Ray. He spent three additional tours in Vietnam and fifteen years overseas as a writer for UPI. Hal...
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...Also a notable entry in this essay is that during the early 1950's the 187th was part of Operation Swarmer which was the largest peacetime Airborne maneuver in history. This peacetime wouldn't last long though. With a growing crisis in the Korean Peninsula, the 187th Airborne Infantry Regiment was being thrown back into the mix as an airborne regimental combat...
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...3 tools of monetary policy – Control of money supply by Federal Reserve (in circulation) 1) Federal reserve can change the reserve requirement ration ( % of each dollar bank must hold on reserve) a. To increase money supply in circulation, the Federal Reserve decrease reserve requirement ratio EX) reserve requirement ratio .10 is 10% you an lower it to .09 or 9% b. To decrease money supply in circulation the federal reserve increases reserve requirement ratio EX) If the reserve requirement ratio is 10% raise it to 11% 2) Federal reserve committee ( Federal Open Market Committee) FOMC conducts Open Market Operations OMO (OMO is the buying and selling of government bonds to and from the public) a. To increase the money supply, Feds FOMC says buy government bonds from the public (Fed writes a check on its own account – means print money added “to” circulation – the banks can give loans & borrowers create additional demand deposits, to create more loans. b. To decrease the money supply, the Feds FOMC says sell government bonds to the public (Fed will receive the publics (our) checks written against the publics account (your own account) made out to the “Feds” they keep it outside the system. 3) The Discount Rate: Rate Fed charges its member (other banks) banks for loans (Fed is a LAST resort for banks) a. To increase the money supply, the Fed will lower discount rate, which encourages banks to borrow more reserves from Fed. i. Bans can then make more loans, which increases...
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...Federal Reserve Monetary Policy ECO/372 University of Phoenix The American economy has been through Hell and back in the new millennium, and for some time economist speculated of the dismal circumstances to affect the U.S financial structure as a whole. This paper is going to highlight a variety of current macroeconomic indicators by specifically defining the objectives of the Federal Open Markets Committee and stating the economic projections for 2015 in hopes of painting a clear picture of the current financial state of the U.S economy. With growth reported in GDP and incomes this past year, there is still concern surrounding overall consumer opinions on the state of our nation’s economy. The results of the Michigan surveys index of consumer sentiment as included as well within the Monetary Policy (2014). This demonstrates the country continues to feel the economy is strengthening as well, as their overall confidence of their own financial situations. However, we are still well below average on the index report which also is reported without much change in the last year. Although we have improved our outlook since the recession that occurred in 2008, we remain guarded and safe in our observations. With slowly increasing consumer sentiment, housing starts continue to increase slowly along with our post housing bubble recession recovery (Monetary Policy, 2014). Single family and multifamily starts show a very slow trending increase but at a .6 high index for 2014...
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...rate target of 2.25 percent. What policy action should the Trading Desk implement to comply with the new FOMC Directive? a. At the conclusion of each FOMC meeting, the Committee issues a statement that includes the federal funds rate target, an explanation of the decision, and the vote tally, including the names of the voters and the preferred action of those who dissented. To implement the policy action, the Committee issues a directive to the New York Fed’s Domestic Trading Desk that guides the implementation of the Committee’s policy through open market operations. Before conducting open market operations, the staff at the Federal Reserve Bank of New York collects and analyzes data and talks to banks and others to estimate the amount of bank reserves to be added or drained that day. They then confer with Fed officials in Washington who do their own daily analysis and reach a consensus about the size and terms of the operations. Then, a New York Fed official sends a message to the primary dealers to indicate the Fed’s intention to buy or sell securities, and the dealers submit bids or offers as appropriate. 2. Explain the adjustments that will take place in the above diagram following the policy action you identified in part (a). b. The Federal Reserve bank would need to account for less reserves but add onto the percentage rate of funds just as shown for the equilibrium. The change in the graph will be as shown...
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...national fiscal policies that can affect the housing market are the Federal Open Market Committee and the U.S. Department of Treasury. The Federal Open Market Committee sets monetary policies that affect interest rates, employment, and inflation. These monetary policies are created through the regulation of the amount of currency that is in circulation through the sale or purchase of T-Bills. If the Federal Reserve Banks purchase T-Bills more currency is then released into circulation which will lower interest rates. If the Federal Reserve Banks sell T-Bills currency is taken out of circulation which in turn raises interest rates. Private banks use these base interest rates to then determine the amount of interest to charge its customers when they wish to borrow money in the form of personal loans, construction loans, building loans, and mortgages. If interest rates are high, mortgage rates will also be higher. The higher the rates the less likely consumers will apply for a mortgage to purchase a new home. The Federal Reserve also purchases mortgage-backed securities to provide support to the mortgage and housing markets and to improve conditions in financial markets. These purchases allow entities such as Freddie Mac and Fannie Mae to provide more mortgages to consumers (Burek, 2010). The U.S. Department of Treasury controls the value of the dollar which impacts the economy through inflation. The Treasury can affect the housing market through the sale of Treasury Bonds, T-Bills and...
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...The Current Financial Environment FIS/260-Financial Markets & Institutions: You Can Bank On It Michael Ricks When I first took a look at this assignment I thought it would be easier than it this. I looked for days on the internet trying to find banks or depositories with credit cards with variable interest rates. What I found was many banks with many credits all with annual percentage rates (APR). So to keep my insanity I just looked at three commercial banks. I looked at Bank of America, US Bank, and Regions bank. I looked at all their credit cards student, business, rewards, and secured. Bank of America credit cards Apr varied anywhere from 12.99% to 20.99%. Here is how they get people, 0% introductory APR for the first 12 billing cycles only for purchases. When that cycle ends your rate will depend on your creditworthiness. US Bank does similar and their rates are from 11.99% to 23.99%. Regions is in the same neighborhood starting at 13.99%, 16.99%, or 19.99% based on credit, but can quickly climb to 24.99% or even 29.99%. Every bank I researched, including credit unions, all based the rate that you would receive on your creditworthiness when you open your account. After that, your APR will vary with the market based on the Prime Rate as set out in the Variable-Rate information section of your agreement. The current annual percentage rate (APR) for a new car can vary from bank to bank, amount to amount, and year to year. It is not something that is...
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