Chapter 10.docx - Chapter 10 Monetary Policy 10.1 Bank of Canada Founded in 1935 Crown corp since 1938 It o Conducts monetary policy o Designs produce

Chapter 10.docx - Chapter 10 Monetary Policy 10.1 Bank of...

This preview shows page 1 - 2 out of 5 pages.

Chapter 10: Monetary Policy 10.1 Bank of Canada Founded in 1935. Crown corp. since 1938. It: o Conducts monetary policy o Designs produce distributes banknotes o Oversees the payment system to ensure the stability of the financial system o Manages federal government funds Does not include managing the exchange rate 10.11 monetary policy framework Flexible exchange rate (BOC only interferes in extreme circumstances) Inflation target 1% to 3% Bank raises or lowers interest rates to achieve the target within 6 to 8 quarters. o The time it takes a policy to take place in the economy. Core CPI = CPI (general basket of goods) o CPI – XFET = CPI - food, energy, and effect of changes in indirect taxes 10.1.2 The overnight rate Bank of Canada executes monetary policy via target for the overnight rate The overnight rate is the rate at which banks lend money to each other at the end of each day Transactions netted out via multilateral netting o Netting = canceling offsetting obligations o Bilateral CIBC owes TD $5 million TD owes CIBC $4 million CIBC makes a $1million transfer to TD o Multilateral involves bare institutions How the bank of Canada controls overnight rate (skipped slide?) o Sets target rate o Sets operating band (0.5% wide) target rate is the middle o the upper end of band (target +0.25%) is called bank rate o the lower end (-.25%) called bottom of the operating band 10.1.3 how policy decision made decisions made 8 times a year 5-8 weeks apart o 1. Use economic projections to analyze developments and near future of the Canadian economy
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 5 pages?

  • Fall '13
  • LoganMcleod

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask You can ask ( soon) You can ask (will expire )
Answers in as fast as 15 minutes