EC250 Chapter Notes -Monetarism, Monetary Policy, Money Supply
Document Summary
Bank of canada: crown corporation wholly owned by the federal government, apart from conducting monetary policy it, designs, produces and distributes bank notes, oversees the payment system to ensure the stability of the financial system, manages federal government funds. Accounts are settled at the end of each day: multilateral netting, cancelling offsets of obligations through a central clearing system, operating band, 0. 5% wide with the target in the middle, 0. 25+ bank rate, 0. 25 is the bottom, example: target rate is 0. 75% Interest rate is determined by decisions to save and invest and exchange rate is determined in the foreign exchange market by the demand and supply for cad: sell dollars to prevent appreciation resulting in the money supply increasing, buy dollars to increase demand and reduce the money supply with the interest rate on the decision to save or invest, adjust money supply to achieve demand =supply of funds, the exchange rate is then determined in the foreign.
