06_Lecture_Slides_with_Graphs

06_Lecture_Slides_with_Graphs - Economics 104 Fall 2010 1...

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Unformatted text preview: Economics 104 Fall 2010 1 The Economy in the Short Run The Central Bank Outline & Readings Stabilizing the Economy: The Role of the Central Bank; chapter 9 (including appendix) Stabilizing the Economy: The Role of the Central Bank Objective: To introduce the central bank, its objectives of stabilizing economic fluctuations, and a simple description of the operation of monetary policy. Although the focus is monetary policy, we will not at this point be discussing money itself! Economics 104 Fall 2010 2 1. Bank of Canada a Brief Introduction The Bank of Canada is Canadas central bank and responsible for monetary policy . Established by the Bank of Canada Act (1935) with a mandate for economic growth, exchange rate stability, low unemployment, and low inflation. Since 1991, the Bank has set monetary policy to achieve an inflation target . Currently the target is 13 percent CPI inflation. The Bank implements monetary policy by controlling and changing a (very) short term nominal interest rate, referred to as the policy rate . Monetary policy is implemented (since 2000) with regularly scheduled announcements eight per year. A key feature of monetary policy these days greater transparency. Economics 104 Fall 2010 11 WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada; From the Preamble to the Bank of Canada Act , available at: www.bankofcanada.ca Inflation (2) Page 1 Canada: CPI Inflation and the Inflation Target-2-1 1 2 3 4 5 6 7 8 1 9 9- 1 1 9 9 1- 1 1 9 9 2- 1 1 9 9 3- 1 1 9 9 4- 1 1 9 9 5- 1 1 9 9 6- 1 1 9 9 7- 1 1 9 9 8- 1 1 9 9 9- 1 2- 1 2 1- 1 2 2- 1 2 3- 1 2 4- 1 2 5- 1 2 6- 1 2 7- 1 2 8-...
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This note was uploaded on 01/28/2011 for the course ECON 104 taught by Professor Voss during the Winter '10 term at University of Victoria.

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06_Lecture_Slides_with_Graphs - Economics 104 Fall 2010 1...

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