Unformatted text preview: Supply 2. Foreign exchange market operations • Boc BUYS foreign currency and SELLS $CAD to INCREASE the money supply • BoC SELLS foreign currency and BUYS $CAD to DECREASE the money supply • Sterilization – reversing the effects of a foreign exchange market operation by using an open market operation 3. Changing the overnight rate • INCREASING the overnight rate DECREASES the money supply • DECREASE the overnight rate INCREASE the money supply The BoC controls the money supply but cannot control it precisely because of the influence of individual’s saving decisions and bank’s lending decisions....
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- Winter '08
- Monetary Policy, Fractional-reserve banking, BoC