Discount Rate
Open Market Operations (OMO)
Monetary policy can be implemented by changing monetary base. Central Banks use (OMO) to change the monetary base. They buy or sell reserve assets (usually financial instruments such as bonds) in exchange for money on deposit at the central bank. Those deposit are convertible to currency. Together such currency and deposits constitutes the monetary base which is the general liabilities of the central bank and its own monetary unit.
Reserve Ratio
The commercial banks have a statutory obligation to have a defined ratio of their total deposit liabilities with the central bank; Obinna (2008). If contractionary monetary policy is desired the Central Bank raises the ratio of the reserve thereby forcing the commercial banks to cut back on their lending activities and therefore their ability to create money.
Moral Suasion
This consists of informal advice and appeal by the central bank to the commercial banks about how they conduct their credit policy and lending operations. The essence of this technique is persuading rather than forcing the commercial bank to heed to the advice given by the central bank.
Direct Control of Banking System
This involves the imposition of quantitative ceiling on the overall or sectoral distribution of credit by central bank. This tool is selective not general, it is direct. It can be used as a weapon for economic growth.
Direct Regulation of interest Rate
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