The discount policy is an instrument of the monetary policy, in order to affect the creation of money and with it the money supply in a national economy.

Instruments

The discount policy covers the following instruments:

• Change of the rate of discount: A high rate of discount raised the price of for banks rediscounting (submission of an accepted change with the central bank) of changes and limits so their possibility of supplying itself with liquidity. They can assign thereby less credit and the creation of money become smaller. A lowering of the rate of discount causes the opposite.
• Introduction of rediscount contingents: The quantity that changes at the most which can be rediscounted is limited according to bank-specific criteria. A sinking of the contingents reduces the creation of money, a rise increases it.
• Change of the quality requirements to rediscountable changes: Stricter requirements reduce the creation of money, less increase them.

Abolishment

The German Federal Bank adjusted 1999 the discount transaction with beginning of the third stage of the European monetary union, and its associated transition to the European system of the central banks (ESZB). The European central bank and it attached central banks accept no changes for rediscounting.

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