| | Economic Issues No. 5--Transformations to Open Market Operations (Site not responding. Last check: 2007-10-28) |
 | | Open market operations allow central banks great flexibility in the timing and volume of monetary operations at their own initiative, encourage an impersonal, businesslike relationship with participants in the marketplace, and provide a means of avoiding the inefficiencies of direct controls. |
 | | If open market operations are to become the principal policy instrument, other monetary instruments obviously need to be given less importance, particularly the central bank's discount window, where the banking system can obtain reserves on its own initiative simply by borrowing from the central bank. |
 | | Still, for most emerging markets and transitional economies, which are prone to surges in liquidity and sudden capital flows and with markets at varying stages of development, a complementary mix of all monetary instruments may be the best solution. |
| www.imf.org /external/pubs/ft/issues5/index.htm (5465 words) |