Describe the market for reserves within the banking sector. Suppose the Central Bank’s policy is to target a given interbank interest rate. Explain why, in a period financial crisis, manoeuvring the discount interest rate can be more effective than conducting open market operations to control the interbank interest rate. You may refer to explicit examples (e.g. the experience of a country of your choice) to support your explanations.

Explain why, in a period financial crisis, manoeuvring the discount interest rate can be more effective than conducting open market operations to control the interbank interest rate. You may refer to explicit examples (e.g. the experience of a country of your choice) to support your explanations.