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Article: Origins of the use of treasury debt in open market operations: Lessons for the present.(Statistical Data Included)
- Article from:
- Economic Perspectives
- Article date:
- March 22, 2002
- Author:
CopyrightCOPYRIGHT 2002 Federal Reserve Bank of Chicago. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Introduction and summary
From late 1997 through the third quarter of 2001, continuing fiscal surpluses by the federal government caused the outstanding stock of Treasury debt to decrease substantially. While the onset of the current recession, along with the recent tax cuts, has slowed or even reversed this trend, many analysts believe that the declines in Treasury debt will resume over the next decade once the economy starts to strengthen. This could present an operational problem for the Federal Reserve. The Fed currently injects liquidity into the economy by expanding bank reserves via open market operations. That is, the Federal Reserve expands liquidity by ...
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