POL224Y1 Lecture Notes - Lecture 5: Capital Control, Swedish National Bank, Money Creation
Document Summary
Keynesians = counter-cyclical; monetary policies should be adjusted according to economic state. Monetarists = steady increase of money supply (politics shouldn"t influence mgmt. of : central bank & money supply. I. e. sweden"s sverige riksbank (1688), uk"s bank of england (1694), bank of canada (1935) Historical context: monarchs needed to borrow money for war & nobility wanted to prevent defaults in payments. They adjust money supply by: changing discount rate (policy interest rate / overnight target rate) Lower interest rate = increase supply of m. Lower % required reserve = increase supply of m. Happens rarely; publicized well in advance: by market operations. I. e. state buying back bonds = increase supply of m. -originally institutions of parliament; therefore usually not independent, even though that"s the popular belief in namerica. A certificate issued by the state with an interest rate and maturity date. Requires the state to be perceived as trustworthy. 2009, greece hit hard by previous year"s crisis.
