open-market operation


open-market operation

      any of the purchases and sales of government securities and sometimes commercial paper by the central banking authority for the purpose of regulating the money supply and credit conditions on a continuous basis. Open-market operations can also be used to stabilize the prices of government securities, an aim that conflicts at times with the credit policies of the central bank. When the central bank purchases securities on the open market, the effects will be (1) to increase the reserves of commercial banks, a basis on which they can expand their loans and investments; (2) to increase the price of government securities, equivalent to reducing their interest rates; and (3) to decrease interest rates generally, thus encouraging business investment. If the central bank should sell securities, the effects would be reversed.

      Open-market operations are customarily carried out with short-term government securities (in the United States, frequently Treasury bills). Observers disagree on the advisability of such a policy. Supporters believe that dealing in both short-term and long-term securities would distort the interest-rate structure and therefore the allocation of credit. Opponents believe that this would be entirely appropriate because the interest rates on long-term securities have more direct influence on long-run investment activity, which is responsible for fluctuations in employment and income.

* * *


Universalium. 2010.

Look at other dictionaries:

  • open market operation — Any of the purchases and sales of government securities and commercial paper by a central bank in an effort to regulate the money supply and credit conditions. Open market operations can also be used to stabilize the prices of government… …   Universalium

  • Open-market operation — Purchase or sale of government securities by the monetary authorities to increase or decrease the domestic money supply. The New York Times Financial Glossary …   Financial and business terms

  • open market operation — The buying and selling of government securities Treasury bills, notes, and bonds by the Federal Reserve. Chicago Board of Trade glossary …   Financial and business terms

  • open-market operation — Purchase or sale of government securities by the monetary authorities to increase or decrease the domestic money supply. Bloomberg Financial Dictionary …   Financial and business terms

  • open market operation — /ˌəυpən mɑ:kɪt ɒpəˌreɪʃ(ə)n/ noun a sale or purchase of government stock by ordinary investors, used by the government as a means of influencing money supply …   Dictionary of banking and finance

  • Open market operations — (also known as OMO) is the buying and selling of government bonds on the open market by a central bank. It is the primary means of implementing monetary policy by a central bank. The usual aim of open market operations is to control the short… …   Wikipedia

  • open-market — ˌopen ˈmarket adjective [only before a noun] ECONOMICS FINANCE in an open market action, operation etc, a central bank increases or reduces the money supply (= the amount of money in the economy): • a Federal Reserve open marke …   Financial and business terms

  • OPEN MARKET — OPEN MARKE Littéralement «marché ouvert». Ce marché est constitué par les achats et les ventes de fonds d’État et d’effets de commerce accomplis par les banques centrales, en vue de compléter et d’étendre leur action sur le marché monétaire et… …   Encyclopédie Universelle

  • Opération d'open market — Opérations d open market Au sens strict, les « opérations d open market » ((en) Open Market Operations) consistent en l achat et la vente fermes (c est à dire définitives) de titres, en particulier de titres publics (bons du Trésor) par …   Wikipédia en Français

  • Open-market purchase operation — A systematic program of repurchasing shares of stock in market transactions at current market prices, in competition with other prospective investors. The New York Times Financial Glossary …   Financial and business terms


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.