OPERATIONS ON THE OPEN MARKET

OPERATIONS ON THE OPEN MARKET
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Under the open market operations refers to the buying and selling of securities on the open market Federal reserve Bank of new York. Daily Manager of internal operations (Manager for Domestic Operations) performs these operations in accordance with the directives of the Federal Committee on open market operations (message negatively affected, Federal Open Market Committee – FOMC)10. Operations on the open market is the most powerful weapon in the Arsenal of the fed. In fact, through them is determined by the amount of available Depository institutions non-borrowed funds. If the fed buys securities, the reserves of the system are growing; the sale volume of reserves decreases. When the Institute of Deposit excess reserves appear, i.e. surplus above the mandatory minimum, the Institute will expand its loan portfolio to a level where the amount of reserves will decrease to minimum. Thus, the fed directly affects the behavior of Depository institutions, loans and, through them, to interest rates and the economy.The Federal reserve can affect the money supply simply by buying or selling government securities, as the fed has the unique ability to set the requirements itself. Moreover, by definition, any requirement of Deposit to the Institute is considered by the fed reserve. This occurs when the fed writes out a check for the filing itself, for example, for the payment of state securities by an individual. This receipt will eventually return to the fed from any Depository institution for clearing, or settlement. To repay the check, the fed just increases the amount in the reserve account and Deposit this Institute. This increase in the provision is the first stage of the process of money creation.