Open market operations 公開巿場操作

Tools to control money supply (3)
控制貨幣供應方案（三）
Open Market Operations (OMO) 公開巿場操作

#Definition: Open market operations refer to the central bank's purchase and sale of government bonds in the market.
( = buying and selling of government bonds)

Situation I: 
Government buys bonds
政府買入債券
a) Release money (currency) to public
貨幣流入公眾
b) Part of the money is deposited into banks
部分現金會存入銀行
c) Multiple creation of credit
貨幣創造倍增
d) Money supply increases
貨幣供應增多

Paragraph in complete sentences:
When the central bank buys government bonds from the market,currency flows from the central bank to the market. Hence, the monetary base increases. Part of the currency is held by the public and part of it is deposited into banks. When banks lend their excess reserves to earn profits, multiple creation of money results. Thus, money supply increases further.

Situation II: 
Government sells bonds
政府售出債券
a) Absorb money (currency) from public
貨幣從公眾流走
b) Part of the money is withdrawn from deposits (banks)
部分現金會由銀行提出
c) Multiple contraction of credit
貨幣創造收縮
d) Money supply decreases
貨幣供應減少

Paragraph in complete sentences:
When the central bank sells government bonds from the market,currency flows from the market to the central bank. Hence, the monetary base decreases. Part of the currency taken is held by the public and part of it is withdrawn from banks. Multiple contraction of money results. Thus, money supply decreases.

SUMMARY

When the central bank buys (sells) the government bonds in the market, the money supply increases (decreases).
政府賣出債券 貨幣供應減