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In this paper, we introduce credit ceilings in the standard model of the money multiplier and analyze their role in central bank's management of money supply in the presence of indirect monetary instruments. We show that under a regime of total credit ceilings, their optimal value equals the desired growth rate of the adjusted monetary base. Under a regime of partial credit ceilings, their optimal value depends on the desired growth rate of the adjusted monetary base, the degree of substitutability between the regulated and unregulated types of banks' earning assets, and the autonomous growth rate of the latter.

Banks and Banking --- Money and Monetary Policy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary economics --- Banking --- Credit ceilings --- Monetary base --- Credit --- Commercial banks --- Banks and banking --- Money supply --- Bulgaria

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This paper reviews the Jamaican experience with indirect instruments and contrasts this with the currency board type arrangements of the common currency area governed by the Eastern Caribbean Central Bank (ECCB). Reforms in Jamaica improved intermediation and banking efficiency, but a weak fiscal position and interest rate caps undermined the effectiveness of indirect instruments in attaining monetary control. The apparent stability amongst members of the currency union may mask fiscal pressures. In most Caribbean countries, problems of quasi-fiscal pressures on money supply, and disintermediation due to some regulation, are evident. Resolving these issues are necessary to facilitate the reforms being pursued.

Banks and Banking --- Money and Monetary Policy --- Foreign Exchange --- Monetary Policy --- Central Banks and Their Policies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Monetary economics --- Banking --- Currency --- Foreign exchange --- Credit ceilings --- Reserve requirements --- Currencies --- Open market operations --- Money --- Monetary policy --- Central banks --- Banks and banking --- Credit --- Jamaica

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This Selected Issues paper and Statistical Appendix on Portugal attempts to “feel the pulse” of Portugal’s banking system on the eve of European Monetary Union. It surveys the reforms of the financial sector, explores whether prudential concerns have arisen in the process of liberalization, and gauges how well prepared the Portuguese banking system is for heightened competition from abroad. The paper also draws policy lessons from its approach to reform. The paper reviews the financial liberalization process prior to Portugal’s accession to the European Union and its broadening thereafter.

Banks and Banking --- Macroeconomics --- Money and Monetary Policy --- Accounting --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Personal Income, Wealth, and Their Distributions --- Aggregate Factor Income Distribution --- Public Administration --- Public Sector Accounting and Audits --- Banking --- Monetary economics --- Public finance accounting --- Commercial banks --- Personal income --- Credit --- Consumer credit --- Financial institutions --- National accounts --- Money --- Credit ceilings --- Income --- Banks and banking --- Finance, Public --- Portugal

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We study credit card rewards as an ideal laboratory to quantify redistribution between consumers in retail financial markets. Comparing cards with and without rewards, we find that, regardless of income, sophisticated individuals profit from reward credit cards at the expense of naive consumers. To probe the underlying mechanisms, we exploit bank-initiated account limit increases at the card level and show that reward cards induce more spending, leaving naive consumers with higher unpaid balances. Naive consumers also follow a sub-optimal balance-matching heuristic when repaying their credit cards, incurring higher costs. Banks incentivize the use of reward cards by offering lower interest rates than on comparable cards without rewards. We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas, widening existing disparities.

United States --- Macroeconomics --- Economics: General --- Money and Monetary Policy --- Exports and Imports --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Literacy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Aggregate Factor Income Distribution --- International Lending and Debt Problems --- Economic & financial crises & disasters --- Economics of specific sectors --- Monetary economics --- International economics --- Consumer credit --- Money --- Income --- National accounts --- Credit ceilings --- Interest payments --- External debt --- Income distribution --- Currency crises --- Informal sector --- Economics --- Credit --- Debt service

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This Selected Issues paper on Vietnam analyzes interest rate policy under credit control. There are a number of issues involved in setting interest rates in the presence of bank-by-bank credit ceilings that do not arise in other controls. In Vietnam, as macroeconomic stabilization has taken hold, the inconsistencies of an administratively controlled financial system are becoming more evident. This points to the importance of moving quickly to develop additional policy tools so that interest rate policy can be freed from the tradeoffs being faced, allowing different policy objectives to be pursued independently.

Banks and Banking --- Exports and Imports --- Macroeconomics --- Money and Monetary Policy --- Interest Rates: Determination, Term Structure, and Effects --- International Investment --- Long-term Capital Movements --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Current Account Adjustment --- Short-term Capital Movements --- Macroeconomics: Consumption --- Saving --- Wealth --- Finance --- Monetary economics --- International economics --- Banking --- Foreign direct investment --- Current account deficits --- Deposit rates --- Interest rate policy --- Balance of payments --- Financial services --- Credit ceilings --- Money --- Monetary policy --- Interest rates --- Investments, Foreign --- Credit --- Banks and banking --- Consumption --- Economics --- Vietnam