3LectureCentralBanking

3LectureCentralBanking - Banks 7 Case 4 Clearing Checks...

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1 Central Bank Functions Basic Operations Art of Conducting a Monetary Policy Money Creation thru Banking System
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2 1. Functions Provide $ to banks in order to meet unexpected withdrawals ►prevent bank run and increase public confidence Supervise all banks ► ensure sound banking in order to increase public confidence Acts as a bank for banks ►Clear checks Regulate the flows of Money ► promote stability and growth
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3 2. BOC and Creation of Money Case 1 Open Market Operations Example : BOC buys $100 of govt sec from banks B. O. C Banks
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4 Expansionary vs Contractionary Policy As Reserves increase Why?
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5 Case 2 Selling $100 of govt sec with an agreement to buy back BOC Banks
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6 Case 3 BOC makes $100 DL to bank A BOC
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Unformatted text preview: Banks 7 Case 4 Clearing Checks Bank A receives a check of $100 written on Bank B Bank A BOC 8 3. Art of Conducting A Monetary Policy Goals : promote growth, employment, stabilize price level, defend currency 9 Targeting Money Supply 10 Targeting Interest Rate 11 4. Money Creation thru Banking System Bank A Bank B Bank C 12 Multiplier Effect Banks Deposits Loans Reserves 13 Deposit Multiplier Model Relationship between deposit and reserve 14 B/S of the Baking System All Banks 15 5. Complete Model of Money Supply Assume C DD TD B Reserve Ratio 0 < k D <1 0< k TD <1 Monetary Base = C + Res M1 = C +DD M2 = M1 +TD M3 = M2 +Others Monetary Policy 16...
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This note was uploaded on 02/28/2012 for the course FINE 442 taught by Professor Larbihammami during the Spring '12 term at McGill.

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3LectureCentralBanking - Banks 7 Case 4 Clearing Checks...

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