Summary of Chapter 30
1. Objective of monetary policy
• Control inflation; promote economic growth and full employment;
stabilize business cycle
2. Framework of monetary policy
• Joint statement
• Inflation rate targeting
3. Responsibility for monetary policy
• Bank of Canada
4. Conduct of monetary policy
• Policy instrument: short-term interest rate/overnight loans rate
• How to decide the target overnight rate?
Instrument rule or targeting rule;
• How to hit the target overnight rate?
Operating band sets the range: bank rate sets the upper limit for
overnight rate; settlement balances rate sets the lower limit for