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The Role of Central Bank Lending in the Conduct of Monetary Policy, No. 16-12

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The Role of Central Bank Lending in the Conduct of Monetary Policy, No. 16-12

DATE: December 2016

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ABSTRACT: Central banks can extend credit in pursuit of different policy objectives, two of which are discussed in this Economic Brief. First, lending can be used to achieve interest rate control. Second, lending can be used to provide liquidity insurance. A narrow view of central bank lending emphasizes the first objective, in which subsidized credit to targeted market participants is not seen as essential. A broader view considers targeted lending as sometimes necessary. Which perspective is favored is largely, though not wholly, dependent on judgments about the prevalence of frictions that inhibit the market's ability to allocate liquidity.

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Ennis, Huberto M. , Weinberg, John A. and Federal Reserve Bank of Richmond. "The Role of Central Bank Lending in the Conduct of Monetary Policy, No. 16-12," Economic Brief (December 2016). https://fraser.stlouisfed.org/title/6034/item/583955, accessed on May 28, 2022.

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