ECON 2020U Lecture Notes - Lecture 8: Foreign Exchange Market, Overnight Rate, The Overnight
9 Apr 2016
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Document Summary
A nation"s monetary policy objectives and the framework for setting and achieving that objective stems from the relationship between the central bank and the government. Monetary policy objectives: the objective of monetary policy is ultimately political, it stems from the mandate to the bank of canada, which is set out in the bank of. Canada act 1935: basically, the bank"s job is to control the quantity of money and interest rates in order to avoid inflation. Rationale for an inflation control target: two main benefits flow from adopting an inflation-control target, fewer surprises and mistakes on the part of savers and investors, anchors expectations about future inflation. The monetary policy instrument: the monetary policy instrument is a variable that the bank of canada can directly control or closely target. The bank of canada can set any one of these three variables, but it cannot set all three.
