Monetary policy is central bank actions that impact the supply and demand for base money. In the past they impacted the supply through OMOs and discount loans, and the demand through reserve requirements. Since 2008 they also impact demand through changes in IOR. Thus they have 4 basic policy tools, two for base supply and two for base demand.
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TheMoneyIllusion » Nick Rowe on the New Keynesian modeless prestigious than the Keynesian model, it’s actually a less egregious example of reasoning from a price change, as higher market interest rates really are expansionary, ceteris paribus. PPS. <span>Monetary policy is central bank actions that impact the supply and demand for base money. In the past they impacted the supply through OMOs and discount loans, and the demand through reserve requirements. Since 2008 they also impact demand through changes in IOR. Thus they have 4 basic policy tools, two for base supply and two for base demand. PPPS. Today interest rates and IOR often move almost one for one, so the analysis is less clear. Another complication is that IOR is paid on reserves, but not currency. Higher rates in Summary
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