Alternative Monetary Policy Tools: Funding for Lending and Forward Guidance

The video discusses alternative monetary policy tools, focusing on Funding for Lending and forward guidance. Funding for Lending aims to boost bank lending by providing cheaper funding, encouraging credit creation, and stimulating economic growth. Forward guidance involves central banks communicating future interest rate expectations to influence market behavior. Both tools are crucial in shaping monetary policy and impacting the real economy.

What was the primary goal of the Funding for Lending scheme?

• To increase interest rates

• To reduce inflation rates

• To incentivize banks to boost lending

• To increase government spending

How does the Funding for Lending scheme aim to affect the economy?

• By increasing savings

• By decreasing the productive capacity

• By reducing consumption

• By encouraging credit creation

What is forward guidance primarily used for?

• To control government spending

• To influence market expectations of future interest rates

• To set fixed interest rates

• To increase inflation

Which of the following is a characteristic of specific forward guidance?

• It is only used in emergencies

• It is unrelated to inflation reports

• It involves promises about future interest rates

• It is vague and non-committal

What impact does forward guidance have on economic agents?

• It confuses their decision-making

• It adds weight to their rational expectations

• It decreases their confidence

• It has no impact

What is a potential benefit of forward guidance for banks?

• It increases their overnight funding costs

• It provides them with a sense of security

• It limits their lending capabilities

• It forces them to increase interest rates

What is the overall role of Funding for Lending and forward guidance in monetary policy?

• To support the real economy

• To destabilize the financial market

• To decrease economic growth

• To increase unemployment