Preview
Preview

Essay on The Overnight Policy Rate (OPR)

:: 3 Works Cited
Length: 1046 words (3 double-spaced pages)
Rating: Purple      
Open Document




- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

The Overnight Policy Rate (OPR)
The Overnight Policy Rate (OPR) is the interest rate that commercial banks charge for lending excess reserve to another commercial bank. Central Bank of Malaysia (BNM) determines the OPR. According to the article Monetary Policy Meeting (n.d.), “The reason why Malaysia uses OPR as one of its monetary policy is because OPR triggers a chain of many events such as: the Base Lending Rate (BLR), short-term interest rates, fixed deposit rate, foreign exchange rates, long term interest rates, the amount of money and credit and ultimately a range of economic variables, including unemployment, output, price levels and inflation which are the micro and macro factors on the economics of Malaysia.” The other three tools are Discount Rate, Reserve Requirements (R.R) and Open Market Operations (OMO).
By using the three other tools, the BNM influences the demand for, supply of, balances that depository institutions hold at BNM and in this way it alters the OPR. Giving an example, if the discount rate is lowered, it reduces the cost of borrowing of consumers from commercial banks and this encourages commercial banks to borrow reserves from the BNM. With that being said, OPR decreases and thus it increases the money supply in the economy. This applies when unemployment rates are high and when a country is facing recession. On the other hand, if BNM were to increase the discount rates then thus it increases the cost of borrowing of consumers from commercial banks and there will be less demand of excess reserves because the OPR will increase. This applies when the country is facing inflation. The following graph shows the relation between BLR and OPR.
Graph of OPR and BLR
Retrieved from: http://www.bebas-hutang...


... middle of paper ...


...towards neutralizing the monetary conditions and preventing the risk of financial imbalances that could destabilize the economy recovery process. At the new level of the OPR, the standpoint of monetary policy continues to remain supportive to the economic growth. In conclusion, BNM raise OPR in order to overcome inflation and in opposed to recession, BNM reduces the OPR.



Works Cited

Financial Glossary: Monetary Policy Meeting. (n.d.). Retrieved March 30, 2011, from http://www.realestateagent.com.my/Financial%20Glossary/Monetary%20Po licy%20Meeting.htm.
OPR Decisions & Statements: Monetary Policy Statements. (2008). Retrieved April 3, 2011, from http://www.bnm.gov.my/microsites/monetary/0401_20081124.htm.
OPR Decisions & Statements: Monetary Policy Statements. (2010). Retrieved April 3, 2011, from http://www.bnm.gov.my/microsites/monetary/0401_20100304.htm


Click the button above to view the complete essay, speech, term paper, or research paper

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »







This essay is 100% guaranteed.


Title Length Color Rating  
Modern Monetary Policy: The Fed's Economic Oversight Essay - Monetary Policy: The Fed's Economic Oversight Modern Monetary policy is defined as “[t]he actions of a central bank, currency board, or other regulatory committee that determines the size and rate of growth of the money supply in a country, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money that banks are required to keep in the vault also known as bank reserves” (Investopedia). Meanwhile, fiscal policy is determined by government actions, and how money is spent and collected, not by a central bank....   [tags: Economics]
:: 11 Works Cited
2117 words
(6 pages)
Term Papers [preview]
The Effect Monetary Policy has on Macroeconomic Factors Essay - The Effect Monetary Policy has on Macroeconomic Factors Monetary policy includes the manipulation in the money supply by the Federal Reserve that will influence interest rates, which will cause a snowball effect in total overall spending. The change in interest rates, in many cases are a determining factor in the decision-making process to purchasing a house, a new car, borrow money for home improvements and many other decisions on purchases which will impact the total level of spending in the economy....   [tags: Monetary Policy Interest Rate Fed] 1581 words
(4.5 pages)
Strong Essays [preview]
Essay about The Exchange Rate Regime of the UAE - Introduction The significance of exchange rates within the economy of any society cannot be over emphasized since it is a relevant price concept of any nation. Alterations in exchange rates can lead to massive reallocations of raw materials, resources as well as production between the tradable and non-tradable sectors of the economy of any Country. But seldom is the concept of the exchange rate truly depicted for what it truly is: A relative price, which like any other economic entity is responsive to the laws of supply and demand....   [tags: monetary policy]
:: 11 Works Cited
2738 words
(7.8 pages)
Research Papers [preview]
Use of Monetary Policy and Fiscal Policy During The Great Recession Essay - How can monetary policy and fiscal policy greatly influence the US economy. Keynesian economics says, “A depressed economy is the result of inadequate spending .” According to Keynesian the government intervention can help a depressed economy through monetary policy and fiscal .The idea established by Keynes was that managing the economy is a government responsibility . Monetary policy uses changes in the quantity of money to alter interest rates, which in turn affect the level of overall spending ....   [tags: Monetary Policy, Fiscal Policy]
:: 30 Works Cited
1100 words
(3.1 pages)
Strong Essays [preview]
Monetary and Economic Policy in Latvia Essay - I. Currency war, also known as “competitive devaluation,” is an international situation in which countries challenge each other in achieving a low exchange rate for their currency. Recently, the most prominent conflict has been that between China and the United States over valuating of the Yuan. This major focus is on China, due to fears that currency manipulation may result in currency wars, and China’s gathering of more than $3 trillion in foreign exchange reserves has evolved to the idea that it is purposely undervaluing the renminbi....   [tags: Monetary Policy] 992 words
(2.8 pages)
Better Essays [preview]
Infant Mortality Rate-Government Policy To Blame? Essay examples - As of 2009, the United States has been found to have one of the worst infant mortality rates among the industrialized nations, despite administering more vaccines than any other country (Goldman, 2). The cause of this serious predicament has been debated by many people. Recently, a study was published which presented an argument that indicates that infant mortality rates have a direct correlation to the number of infant deaths in industrialized nations. The intention of this paper is to show that the government policy of mandatory immunizations should be revoked until the problem has been investigated....   [tags: Sociology ]
:: 5 Works Cited
1800 words
(5.1 pages)
Powerful Essays [preview]
Central Banks: Fiscal Policy and Monetary Policy Essay - 1) (A) Analyse both the conventional and unconventional tools used by central banks. (a) Cash related course of action alludes to the measures which the national bank of the country takes in directing the trade and credit supply in for cold hard currency the country with a viewpoint to fulfilling certain specific financial targets. This is the Monetary Policy. Objectives of Monetary Policy:- 1. Regulating Inflation and Deflation:- Swelling and emptying in the costs both are bad for the budgetary development....   [tags: monetary policy, cash]
:: 8 Works Cited
1810 words
(5.2 pages)
Strong Essays [preview]
Monetary Policy Essay - Introduction Monetary policy is among the many tools used by a national government to manipulate its financial system. Monetary policy refers to the method used by the financial authority of any country to control the supply and availability of money (Woelfel, 1994). It is often targeted at interest rates to achieve lay down objectives directed towards economic growth and stability (Woelfel, 1994). Monetary policy rests on the link between interest rates in an economy, that is, the relationship between interest rates and the total money supply....   [tags: Expansionary and Contractionary Policy] 1346 words
(3.8 pages)
Good Essays [preview]
Difficulties in Formulating Macroeconomic Policy Essay - Difficulties in Formulating Macroeconomic Policy Policy makers try to influence the behaviour of broad economic aggregates in order to improve the performance of the economy. The main macroeconomic objectives of policy are: a high and relatively stable level of employment; a stable general price level; a growing level of real income (economic growth); balance of payments equilibrium, and certain distributional aims. This essay will go through what these difficulties are and examine how these difficulties affect the policy maker when they attempt to formulate macroeconomic policy....   [tags: Economics Policy Making Essays]
:: 7 Works Cited
1999 words
(5.7 pages)
Strong Essays [preview]
Monetary Policy Essay - Introduction The Federal Reserve System, often referred to as "the Fed", is the central bank of the United States. It was created on December 23, 1913, with the signing of the Federal Reserve Act by President Woodrow Wilson. The Fed conducts the nation's monetary policy by influencing money and credit conditions in the economy. (The Federal Reserve Board, 2006) Monetary policy is one of the tools that the government uses to influence the economy in order to achieve economic stability. The Fed increases or decreases the money supply to influence inflation, unemployment, interest rates and economic growth....   [tags: Economics Fed Federal Reserve Interest Rate Macroe] 718 words
(2.1 pages)
Strong Essays [preview]