Textbook Notes (363,091)
Canada (158,185)
Economics (1,055)
EC223 (81)
Chapter 16

Chapter 16 EC223.docx

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Wilfrid Laurier University
Angela Trimarchi

EC223 Chapter 16 – The Money Supply Process Week 9 Three Players in the Money Supply Process 1. The central bank – the government agency that oversees the banking system and is responsible for the conduct of monetary policy; in Canada, the Bank of Canada 2. Banks (depository institutions) – the financial intermediaries that accept deposits from individuals and institutions and make loans: chartered banks and near banks 3. Depositors – individuals and institutions that hold deposits in banks The Bank of Canada’s Balance Sheet Assets Liabilities -Government securities -Notes in circulation -Advances to banks -Reserves Liabilities -Often referred to as monetary liabilities of the Bank of Canada -The sum of the Bank’s monetary liabilities (notes in circulation and reserves) and the Canadian Mint’s monetary liabilities (coins in circulation) is called the monetary base Notes in Circulation -The amount of notes that is in the hands of the public and the depository institutions -Coins issued by the Canadian Mint are not a liability of the Bank of Canada -The coins and Bank of Canada notes that we use are collectively known as currency Reserves -All banks that participate in the Large Value Transfer System (LVTS) have an account at the Bank of Canada in which they hold deposits -Reserves consist of settlement balanced at the Bank of Canada plus currency that is physically held by banks -Reserves are assets for the banks but liabilities for the Bank of Canada because the banks can demand payment on them at any time and the Bank of Canada is required
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