logo

Assignment : Memo Writing

   

Added on  2020-03-04

4 Pages674 Words57 Views
Assignment : Memo WritingUniversity of ChicagoBooth School of BusinessStudent Name:Student ID:Subject Name: Money, Banking, and the Financial CrisisSubject ID: BUS33882Date Due:Professor Name:1 | P a g e

Dear Madam,Federal Open Market Committee (FOMC) wants to exit from Fed’s large balance sheet for the next few months for the purpose of current economic situation[ CITATION Joh161 \l 1033 ]. Fed justhas been purchasing enough securities to meet the market obligations and financial crisis. But recently it stopped such purchases and kept its balance sheet constant. This would eventually lead to shrinking of the size of Fed’s balance sheet that will have impact on operation of monetary policy for the market. Fed’s market choices will be preceded by ECB along with other central banks, who will also aim to exit from extraordinary monetary policy[ CITATION Ben17 \l 1033 ].(a)IMF Board of Directors will have significant cost and benefits from this approach. In case Fed starts to shrink the balance sheet this year prior to waiting, it will have a cost impact on IMF. There will be no substantial benefits as Fed will no longer be purchasing any sort of bonds or enhancing its liquidity position.(b)(i) In case Fed keeps balance sheet at current $4.4 trillion versus reducing it by $2 trillion as San Francisco Fed Bank President suggests, then IMF will be benefitted[ CITATION Nar17 \l 1033 ]. IMF will be able to float more bonds for Fed which will be purchased by it and IMF will have access to a wide range of funds.(ii) In case Fed reserves balance sheet at $4.4 trillion compared to reducing it to pre-crisissize that is relative to the economy of around $1.5 trillion, then IMF will be immensely impacted. As Fed owns a huge balance sheet consisting of government bonds of $ 3 trillion, mortgage backed securities along with certain reserves. Reducing its size will mean reducing its market related obligations. Such reduced size will allow immense amounts of liquidity that can possibly lead to a crisis related situation[ CITATION Kat171 \l 2 | P a g e

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Economics Assignment Article 2022
|3
|351
|13

Global Economy U.S. Case Study 2022
|6
|1203
|16

Operations Management
|9
|2285
|121

The Influence of Underwriter And Auditor
|4
|623
|17

Macroeconomic Policy Analysis Article 2022
|7
|1754
|26

Global Financial Crisis of 2008: Impact on International Financial Institutions
|7
|2179
|104