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Comment on this statement by an official of the Federal Reserve: [the Fed] can control nonborrowed reserves through open market operations [but] it cannot control
Comment on this statement by an official of the Federal Reserve:
[the Fed] can control nonborrowed reserves through open market operations [but] it cannot control total reserves, because the level of borrowing at the discount window is determined in the short run by the preferences of depository institutions.
Quoted from Alfred Broaddus, A Primer on the Fed, Chapter 7 in Sumner N. Levine (ed.), The Financial Analysts Handbook (Homewood, IL: Dow Jones-Irwin, 1988), p. 194.
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