How can central bank discounting cause procyclical movements

Reference no: EM13897740

1. How can central bank discounting cause procyclical movements in the money supply? How can the central bank eliminate such a movement? Discuss.

2. The pursuit of selective ?scal policies in the form of tax exemptions and subsidies is common in almost all countries, whereas the usage of monetary policy on a selective basis is rare in the ?nancially developed economies. Why? Should the use of selective monetary policies be abandoned for the LDCs also?

3. Suppose that for a given economy the preconditions for the effective pursuit of open market conditions are not met. What monetary policy tools are likely to be the most effective ones for such an economy? Relate your recommended tools to the preconditions that are not met.

Reference no: EM13897740

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