ECON 295 Chapter 29: Chapter 29 notes.docx
9 Jan 2015
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How the bank of canada implements monetary policy. In principle, monetary policy can be implemented either by targeting the money supply or by targeting the interest rate. But for a given m d curve, both cannot be targeted independently. curve directly, by changing the amount of. The bank of canada could attempt to shift the m s currency in circulation in the economy. It could do this by buying or selling government securities in the financial markets open- market transactions. Example: by using currency to buy ,000 of government bonds from a willing seller, the. Bank of canada would increase the amount of cash reserves in the banking system by. Then commercial banks would lend out these new reserves, deposit money is created, and so forth money supply is increased. The alternative approach to implementing monetary policy is to target the interest rates directly. B)the bank of canada and the overnight interest.
