## Transformation of Markets and Policy Instruments for Open Market Operations

_IMF Working Papers, December 1, 1995_

## Source details

**Canonical URL:** [Transformation of Markets and Policy Instruments for Open Market Operations](https://www.imf.org/en/publications/wp/issues/2016/12/30/transformation-of-markets-and-policy-instruments-for-open-market-operations-1984)

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## Bibliographic details
- Authors: S. H. Axilrod
- Published: December 1, 1995
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451856590.001

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### Summary and core findings
- Developing countries and economies in transition have shifted toward using open market operations as a tool of monetary policy as they rely on deregulated, competitive markets to spur growth.
- For open market operations to be most effective, they require:
  - supportive changes in other policy instruments (reserve requirements, discount window),
  - a competitive banking system and securities market,
  - adaptation of particular open market or market-type instruments to the stage of, and potential for, market development.
- The paper assesses options available to a central bank for:
  - encouraging a competitive market architecture,
  - designing instruments for implementation of open market operations.

### Policy implications and recommendations
- Reform complementary policy instruments (explicitly: reserve requirements and the discount window) to support the transition to open market operations.
- Promote development of a competitive banking system and securities market as prerequisites for effective implementation.
- Tailor open market or market-type instruments to the specific stage of market development and its potential, rather than applying a one-size-fits-all instrument set.
- Central banks should evaluate and select among available instrument designs to align with market architecture and development objectives.

### Subject areas and keywords
- Subject: Banking, Central banks, Financial institutions, Financial markets, Government securities, Monetary base, Money, Money markets, Open market operations, Securities markets
- Keywords: active market, commercial paper, discount window, excess reserves, Government securities, market development, market instrument, market-type operation, Monetary base, Money markets, Open market operations, Securities markets, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/transformation-of-markets-and-policy-instruments-for-open-market-operations-1984_