The Wharton School, University of Pennsylvania. An earlier version of this paper was presented at the American Economic Association Annual Meeting, 27–30 December 1981. The author wishes to thank Edward Kane for his assistance which has resulted in a substantial improvement in the paper.
Controlling Monetary Aggregates: The Discount Window
Article first published online: 30 APR 2012
1983 The American Finance Association
The Journal of Finance
Volume 38, Issue 3, pages 827–843, June 1983
How to Cite
SANTOMERO, A. M. (1983), Controlling Monetary Aggregates: The Discount Window. The Journal of Finance, 38: 827–843. doi: 10.1111/j.1540-6261.1983.tb02504.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This paper argues that current discount window policy, coupled with non-borrowed reserve targeting of the Federal Reserve, makes the quantity of high-powered money endogenous. Examination of the advisability of this procedure in a stochastic environment is conducted using a general equilibrium financial model. It is concluded that the current policy reduces the destabilizing effects of shifts between various depository financial assets, but increases the effect of other asset portfolio shifts and aggregate supply disturbances. These results are consistent with the work of Poole inasmuch as the current debate over discount policy is a repackaging of the debate over interest rate or aggregates control for monetary policy.