ECON 102 Chapter Notes - Chapter 29: Quantitative Easing, Core Inflation, High Tech

• School: UBC
• Department: Economics
• Course: ECON 102
• Professor: Robert Gateman

Document Summary

29. 1 how the bank of canada implements monetary policy. Boc cannot directly set the money supply or directly set interest rates: boc instead targets the money supply or interest rates. Central banks can implement monetary policy through targeting the money supply or interest rate. If money supply is targeting, monetary equilibrium will determine interest rates. Open-market operations: buying/selling government securities in the market. Increase in the money supply would lead to a reduction in the equilibrium interest rate. Eventually increase aggregate demand: changes in real gdp and p cause changes in money demand that banks cannot approximate. Central banks can more easily communicate targets of interest rates rather than the money supply. The bank of canada and the overnight interest rate: The shorter the bond term, the lower the yield (interest rate) Overnight interest rate: interest rate that commercial banks charge each other for overnight loans: tends to be the shortest period of borrowing or lending.