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Lecture 11

EC140 Lecture Notes - Lecture 11: Skyfall, Deflation, National Order Of Quebec


Department
Economics
Course Code
EC140
Professor
Ken Jackson
Lecture
11

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Chapter - Monetary Policy




!
"
#$!"
 %#!#
!&
!"
Objective
 
'()*+
 ,
-
 .!/0!

Joint Statement of the Government of Canada and the Bank of Canada
(" -!(*1
2" 3-21
*" '!+!24((5.!
/24(67
ination rate targeting8.-!
.!
Interpretation of the Agreement
 %-!0%-90%
!21"
 core ination
operational guide  -!
-
Actual ination: 0%-!
!!
2 main bene&ts-!-!
1. $
&

2. !.-9

Critics of ination-control target
(" !-!
/0!
2" %-!!!
!!'/
*" !!.!
.:
Supporters of ination-control target

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

(" 3!-;<;
!"
2" !" 
!!())4!-!"
The Conduct of Monetary Policy
Choosing a Policy Instrument
'
(" Monetary base: ,
2" Exchange rate: !.!

*" Short-term interest rate8!
(=!2
 %>?.!5money supply vs.
interest rate)
 %>.!
 %.!>
Overnight Rate
57<short-
term interest rate
!overnight loans rate8!
Large Value Transfer System 5!7
9!
'!!!
4"2+1
%!&@
5!transmission
mechanism7
!:57
57
Bank’s Decision Making Process
Instrument/Taylor rule
"
 /-!@A
!"
 $B-!(1!
 $1/0C/05!7
1!
Instrument:"
Targeting rule: D!<-
<!!!!
-<!-
 !!

 !

 !!

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Targets8-=/0
.!"
E
!F!9!
!5-7
Hitting the overnight rate target
1. Operating band:
!!?A4"2+194"+1
!!
A) Bank rate8!!
o!!?4"2+1
o

o8!.=
&!!
"
oC

B) Settlement balances rate8

o!!G4"2+1
o !"
%&!
!5!7"
o

2. Open market operations
 0A!A

Overnight rate above target:purchases securities


o%!!
oB(44!
%"%B(44B(44
"9!B(44%
9%
%B(449
!B(44%
B(449%!=

o/
.!
#E"
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