EC140 Lecture Notes - Lecture 7: Toxic Asset, Canadian Dollar, Foreign Exchange Market
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EC140 Full Course Notes
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Document Summary
The objective of monetary policy is to. Control the quantity of money and interest rates in order to avoid inflation. Prevent excessive swings in real gdp growth and unemployment. The boc operates an inflation rate targeting policy: alters interest rates and the money supply to keep inflation in a given range. Fewer surprises and mistakes on the part of savers and investors: called transparency , businesses are better able to anticipate future rates and inflation, and therefore make better investments. Anchors expectations about future inflation: promotes stable, consistent economic growth, downsides to inflation targeting. The conduct of monetary policy: the bank of canada achieves its objectives mainly by altering the money supply. It has the option to set any of the following by altering money supply. The short-term interest rate: the boc cannot set more than one of these at one time. The rate that boc targets is the overnight loans rate.
