11-03-29-Switch of Government Deposits with OMO

11-03-29-Switch of Government Deposits with OMO -...

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Government Deposits At Chartered Banks: Part II March 29, 2011
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Money-Supply Analysis When a shock hits the domestic money- supply system, we record the initial effects in red . This includes all cheque-clearing, such that balance sheets balance. In response various actors make further transactions. These are shown in green. The new equilibrium is shown in blue .
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Increase in Government Deposits At Chartered Banks (GD): Part II The Government of Canada holds chequable accounts at both the Bank of Canada and at Chartered Banks. When the Government switches funds from one account to the other it has monetary consequences There are two possible responses by the Bank of Canada: here we assume that the Bank conducts open market operations so as to keep the value of the monetary base constant. The entries for these open market operations are shown in orange.
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Bank of Canada assets liabilities Gov’t Bonds Currency Deposits 1. Banks 2. Gov’t -1 =-1 +1 -1 +1/6 = +1/6 -1/6 = -1/6 -1 = -1
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This note was uploaded on 07/16/2011 for the course ECON 2154 taught by Professor Boyer during the Winter '10 term at UWO.

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11-03-29-Switch of Government Deposits with OMO -...

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