Even with there reserves ,discount rates and open market operation what do you think is the flaw in their system ?Why in your opinion do you think the E.C.B cannot control money supply perfectly ?
There are two reasons why the e.c.b can't control money supply perfectly
1) It doesn't control the amount of money household decide to hold as deposits in banks
2)It also doesn't control how much financial institutions lend out in loans.
As you know two is the main reason, and it's their inability to control this which prevents them form controlling the money supply perfectly, and as banks are reluctant to lend out money the money supply is limited and the money multipler process is also reducedWhy in your opinion do you think the E.C.B cannot control money supply perfectly ?
What is an E.C.B.
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