Monetary policy Flashcards
1
Q
What is the capital ratio?
A
Money must be put aside to cover their losses, reduces the risk of bank failure
2
Q
What is the liquidity ratio?
A
Ratio between liquid and illiquid assets - prevents a run on the bank
3
Q
What does forward guidance do?
A
Sharing monetary policy intentions with the market, creates confidence/ stability more lending
4
Q
What are unconventional monetary policy tools?
A
Forward guidance, QE /QT, controlling the money supply
5
Q
What problem is created by the central bank being the lender of last resort?
A
Moral Hazard
6
Q
What is the BOE regulatory role?
A
Monitor / stress test banks to evaluate systemic risk (contagion)
7
Q
How does a stronger currency have an impact on growth rates?
A
Inwards shift in AD (exports go down, imports increase)
