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Chapter 11: Q.24 (page 316)

Which is more independent, the Federal Reserve or the European Central Bank? Why?

Short Answer

Expert verified

ECB is greatly more independent and arguably slightly responsible than the Federal Reserve.

Step by step solution

01

Assumption

The political independence of the ECB is instrumental to its primary objective of maintaining price stability. It is a cornerstone of the euro area’s monetary system. Extensive empirical evidence and theoretical analyses have shown that independent central banks are better capable of maintaining low inflation rates.

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Most popular questions from this chapter

Go to the St. Louis Federal Reserve FRED database, and find data on the level of money market mutual fund assets (MMMFFAQ027S). Download the data into a spreadsheet.

a. When did assets start entering money market mutual funds? What was the total worth of assets in money market mutual funds at the end of 1970?

b. For each decade period, calculate the total percentage change in assets from the beginning of the decade to the end of the decade: 1980:Q1–1990:Q1; 1990:Q1–2000:Q1; 2000:Q1–2010:Q1. For each decade period, divide the total percentage change by 10 to get the average yearly percentage increase. Which decade had the largest average yearly growth in money market mutual funds?

c. Calculate the growth rate from the most recent quarter of data available to the same quarter a year prior. How does this growth rate compare to the highest average yearly growth rate for the decades from part b?

How do sweep accounts and money market mutual funds allow banks to avoid reserve requirements?

Which regulatory agency has the primary responsibility for supervising the following categories of commercial banks? a. National banks b. Bank holding companies c. Non–Federal Reserve member state banks d. Federal Reserve member state banks e. Federally chartered savings and loan associations f. Federally chartered credit unions

Securitization changes the systemic (system-wide) risks in the regulated and unregulated “shadow” banking system. What is securitization? Does it pose a problem for effective banking systems?

Unlike commercial banks, savings and loans, and mutual savings banks, credit unions did not have restrictions on setting up branches in other states. Why, then, are credit unions typically smaller than the other depository institutions?
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