Monetary Policy & Federal Reserve - Annotated Bibliography Example

Monetary Policy & Federal Reserve The role of money and its management within economy is one of the critical aspects of managing the overall health of the economy. Federal Reserve System is the central bank in United States with the mandate to regulate US economy and achieve economic targets of growth while at the same time managing unemployment and interest rates at the tolerable level. This research will therefore discuss how Fed operates and what steps it has specifically taken during the current economic crisis. Crisis which emerged after 2007 in the form of credit crunch further emphasized on the role of central banks and how effectively they should manage economy. The major economic concepts to be used in this research include the use of IS-LM curve analysis and how the money supply affects different variables in the economy. Further, this research will also focus upon exploring as to how Fed has used different policy tools such as cutting discount rates, increasing liquidity through open market operations as well as other non-traditional tools. The overall expected outcomes of this research may suggest as to whether Fed has been able to exercise different monetary policy tools wisely or not and whether different steps taken have actually resulted into achievement of Fed’s objectives especially during current economic crisis. Annotated Bibliography Abel, A, Bernanke, B (2007). Macroeconomics. (6th. ed.) New York: Prentice Hall. This book provides comprehensive coverage and explanation of macroeconomic topics including the one on monetary policy and role of Federal Reserve. The book is co-authored by current Federal Reserve Chairman and Nobel Prize Winner, Ben Bernanke. Chapters on money supply and Fed critically discuss the role of Fed, how it performs and how it interacts with the economy. The overall treatment of the topics, specially the role of money supply in IS-LM curve analysis has been well defined. Apart from this, book also focuses on the impact of money supply on the major economic variables such as inflation, growth and unemployment level. This reference is quite good for introductory treatment of important macroeconomics topics. Gwatney, J, Stroup, R, Sobel, R (2003). Economics: Private and Public Choice. (10th. ed.) London: Thomson This book offers elementary treatment of different macroeconomic topics. This reference is quite comprehensive however, in discussing different topics of monetary economics at undergraduate level. Further, this book offers a critical insight into the impact of economics on the individual as well as government level choices. As such this reference provides a critical view of how the steps taken by Fed are going to have an effect on the consumers as well as government. This book further discusses about the choices made by consumers and government and how they influence the policy making of Fed. This book provides a comprehensive view about the interaction of different economic actors and their net impact on economy as a whole. Dornbusch, R, Fischer, S (2003). Macroeconomics. (8th. ed.) New York: McGraw- Hill. This reference is again one of the critical references on macroeconomics providing extensive treatment of the different macroeconomic issues. This reference provides a relatively good mathematical treatment of the topics and outlines the mathematical relationships between different economic variables. This book is also critical because it offers important insight into the role of money and its interaction with other variables. This therefore further clarifies as to how economic variables interact and the impact of this interaction on the economy as a whole. What is critical is that this book offers a very detailed analysis of IS-LM model and how Fed can actually plays its role in ensuring that the interaction of both does not adversely impact the economy. Overall, this is a good reference book on different macroeconomic topics. Blinder, Alan S (1999). Central Banking in Theory and Practice . Boston: The MIT Press. This book is actually comprises of a series of lectures from the former vice chairman of FOMC and a Princeton Economics professor. This book clearly outlines the critical theory behind the monetary policy and the central banking. The overall focus of this book is on outlining the role of FED and how it should carry out its operations including its role in preventing crisis within economy. This book also discusses the role of macroeconomic models and their shortcomings to predict the crisis and suggest important changes to be made in economic variables. Blinder also discusses the use of policy instruments used by Fed and should be used by Fed in order to better perform its role in the economy. Blinder also discusses the role of legislation and the Congress while discussing the historical evolution of Fed and the impact Congress can have on its working. Froyen, R (2008). Macroeconomics: Theories and Policies. (8th. ed.) London: Pearson Education. This is relatively an advanced level book on the macroeconomics and deal with different topics in relatively more details. The book outlines further mathematical treatment of different issues in monetary policy. Froyen further discusses specifically the role of monetary policy in achieving the broader macroeconomic objectives. It is critical to note that this book provides a comprehensive treatment of the monetary policy both from the Keynesian perspective as well as the Monetarist approach. It follows a chronological approach and defines the earlier and recent theories on Monetary Policy and offers an insight into how the role of Fed emerged. The book clearly contains better treatment of different topics on monetary policy. Tett, G. (2008, Feb). US Banks Borrow $50 Bn via Fed Facility. Retrieved Feb 10, 2012, from Financial Times: http://www.ft.com/cms/s/0/b5183582-de90-11dc-9de3-0000779fd2ac.html One of the roles of Fed is to serve as the lender of last resort under which it provides support to the banks in order to maintain financial stability. This article clearly outlines this role of Fed and discusses as to how US banks started to borrow. During the economic crisis of 2007-2008, banks were facing tough challenges to maintain their liquidity. In order to facilitate more liquidity in the financial system, Fed started a facility. This article therefore discusses as to how the Fed is performing its role of the lender of last resort and offering help through a facility to the financial institutions. This fund was launched in order to calm the money markets which came into turmoil due to credit crunch. (Tett, 2008) Wells, Donald R (2004). The Federal Reserve System: A History. New York: McFarland & Company This book presents a historical introduction to Federal Reserve and how it evolved over the period of time. It first discusses the growth of banking in US and how Fed emerged as a result of the concern for achieving balance. The book further outlines different events and legislative steps which have been taken in order to fully enact Fed and expand its role as the central bank of the country. This reference also discusses the modern changes which took place under Greenspan era and how Fed changed its operating procedures. This book is relatively more useful in providing details about the banking system of the country. Further, it provides historical linkages between the banking sector and the central bank. Lewis, K (2009) U.S. Federal Reserve Cuts Interest Rates to Historic Low America.gov. Retrieved Feb 10, 2012 from http://www.america.gov/st/econ-english/2008/December/20081216153402berehellek0.1642267.html This article discusses the recent steps taken by Fed to curb the economic decline during the credit crunch. This reference provides important insights into one of the measures taken by Fed to reduce the interest rates. Interest rates have been cut in order to stimulate the economic growth and improve consumer confidence. This article is critically important in the sense that it provides a radical view about the practices of Fed and how it might have an impact on the US economy. By clearly suggesting that the rate cut may not serve the purpose, author suggests that this has been done in order to show the psychological presence of Fed and its ability to play its part in falling economy. Author has cited other reasons for reducing the interest rates by Fed too. The Wall Street Journal. (2007). How Does the Fed Inject Money into the Economy? A Primer. Retrieved Feburary 11, 2012, from The Wall Street Journal: http://blogs.wsj.com/economics/2007/08/12/how-does-the-fed-inject-money-into-the-economy-a-primer/ This article actually discusses as to how Fed actually intervene into the market and control the short term rates. The article argues that the one of the key policy tools available to Fed is to control the short term interest rates and as such this is done by controlling the money supply in the country. Fed does so through different tools such as increasing or decreasing the liquidity in the market through open market operations. This article therefore provides a non-technical summary of what Fed does to play its part in the economy of US. Different policy tools outlined in this article provide clear view about the overall functions of Fed. FED. (2009). Open Market Operations. Retrieved Feburary 10, 2012, from FED New York: http://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html This is the description of open market operations given on the New York Federal Reserve site and discusses in details as to what the open market operations are and how they are carried out. This reference clearly suggests that the open market operations are performed in order to affect the short term interest rates. This is invariably done in order to achieve the monetary policy objectives Fed set for itself. This reference further discusses the role of The Federal Monetary Policy Committee and how it carries out the open market operations. It further discusses different authorizations as well as administrative steps required in carrying out the open market operations. It also discusses the steps involved in investing and re-investing of securities purchased and sold through open market operations. Read More