Open Market Operation

Zainab Mehmood
77-S
 Open Market Operations:
Open market operations (OMO) is the term
that refers to the purchase and sale of
securities in the open market by the Central
Bank.
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Securities:
A security, in a financial context, is a certificate or
other financial instrument that has monetary value and
can be traded.
Types
• Equity securities – which includes stocks
• Debt securities – which includes bonds and
banknotes

20XX presentation title 2

Government Securities:

It is the type of debt

obiligation issued by
government with a promise
of repayment on maturity •Treassury bills- a year of less.
date. •Treasury notes- 2-10 years.
•Treasury bonds-more than 10
Why do people buy years.
securities?
• Discount on buying
•Interest on selling
How does OMO work?
● Selling of securities
● Buying of securities
Where does these
trades take place?
Stock Market
A stock market, equity
market, or share market is
the aggregation of buyers
and sellers who trade
in stocks (also called shares).
• Stock exchange
It refers to the entity or
organization that facilitates
these tradings.
• In case of Pakistan it is PSX
(Pakistan stock exchange).
• It provides platform for trading of
both public and private sector
stocks.
• Index
• KSE100: 42000.92
Contractionary Policy
SELLING OF BONDS

IN INFLATION

MONEY SUPPLY
DECREASES

AGGREGATE DEMAND GDP DECREASES

DECREASES
Expansionary Policy
BUYING OF BONDS

IN RECESSION

MONEY SUPPLY
INCREASES

AGGREGATE DEMAND GDP INCREASES

INCREASES
 PERMANANT OMO:
THIS IS INVOLVED IN THE
OUTRIGHT BUYING AND SELLING
OF GOVERNMENT SECURITIES.
● LONG TERM BENEFITS I.E.
INFLATION AND

Types of OMO UNEMPLOYMENT.

TEMPORARY OMO:
TO ADD OR DRAIN RESERVES FOR
SHORT-TERM BASIS.
● THEY ARE OPERATED
THROUGH REPOS OR REVERSE
REPO AGREEMENTS.
 Conclusion
● Most effective tool of monetary policy.
● To control money supply and interest rate.
● To stabilize economy.
● Constant balancing act.
Thank You 