FN6012 –COMMERCIAL BANK MANAGEMENT

NATSIOU ALNISA

ASSIGNMENT#1

  1. Green, Blue, and Beige books: What do these colors mean at the Fed.?

Three research documents play an important role in the monetary policy process and the Federal Open Market Committee meetings. The national forecast for the next two years, generated by the Federal Reserve Board of Governors’ Research and Statistics Division, is placed between green covers and is thus known as the “Green book”. It is provided to all who attend the FOMC meeting.

The “blue book”, in the blue covers, also provided to all participants at the FOMC meeting, contains the projections for the monetary aggregates by the Monetary Affairs Division at the Board of Governors and typically presents three alternative scenarios for the stance of monetary policy (labeled A, B and C). The “Beige book”, with beige covers, is produced by the Reserve banks and details evidence gleaned either from surveys or from talks with key businesses and financial institutions on the state of the economy in each of the Federal Reserve districts. This is the only one of the three books that is distributed publicly, and it often receives a lot of attention in the press.

  2. M1 and M2 monthly historical data and Growth rate computation

            Table 1: M1 and M2 growth rates (2005-2010 monthly)

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FIGURE 1: M1 money supply (2005-2010)

FIGURE2: M2 (2005-2010)


The figures 1 and 2 as well as table1 developed above shows us the movement of the money supply (M1) and M2 and their growth rates in a monthly bases from 2005-2006 and help us understand recent movements of the money supply. Information on how those movements in money supply are determined, can be derived from the money supply equation M=m*(MB+BR). This equation suggests that the movement in the money supply that we can see in Table1and Figure1 is explained by either changes in MB+BR (the nonborrowed monetary base plus borrowed ...

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