Econ 248 Assignment 2
ECON 248
Assignment 2
1.
The bank rate is the interest rate at which the Bank of Canada stands ready to lend reserves to chartered banks. The banker 's deposit rate is the interest rate that the Bank of Canada pays banks on their deposits at the Bank of Canada. Changes to these rates by the Bank of Canada typically spread to other interest rates and therefore will influence the amount of lending done by the banks.
An open market operation is the purchase or sale of government securities, which are government of Canada Treasury bills and bonds, in the open market by the Bank of Canada. These transactions done by the Bank of Canada change the reserves of the banks, which have an immediately impact on the amount of overnight borrowing. This enables the Bank of Canada to hit its overnight rate target.
Government deposit shifting is the practice of shifting government deposits between the government 's account at the Bank of Canada and its accounts at the various chartered banks. These shifts of deposits affects the banks ' reserves, and therefore their ability to make overnight loans. Since this tool is typically used on a small scale to smooth daily fluctuations in the amount of overnight loans, its impact on the implementation of monetary policy is small.
The required reserve ratio is the portion of depositors ' balances banks must have on hand as cash, as determined by the central bank. The monetary policy of a required reserve ratio is no longer in use by the Bank of Canada. The Bank of Canada 's policy tools work by changing the quantity of money in the economy, by changing the monetary base.
By raising the bank rate, the Bank of Canada can make it more costly for the banks to borrow reserves. By raising the interest rate it pays the banks on their own deposits at the Bank of Canada, it can induce the banks to want to hold larger reserves. By selling securities in the open market, the Bank of Canada can decrease the monetary base. The Bank of Canada
Assignment 2
1.
The bank rate is the interest rate at which the Bank of Canada stands ready to lend reserves to chartered banks. The banker 's deposit rate is the interest rate that the Bank of Canada pays banks on their deposits at the Bank of Canada. Changes to these rates by the Bank of Canada typically spread to other interest rates and therefore will influence the amount of lending done by the banks.
An open market operation is the purchase or sale of government securities, which are government of Canada Treasury bills and bonds, in the open market by the Bank of Canada. These transactions done by the Bank of Canada change the reserves of the banks, which have an immediately impact on the amount of overnight borrowing. This enables the Bank of Canada to hit its overnight rate target.
Government deposit shifting is the practice of shifting government deposits between the government 's account at the Bank of Canada and its accounts at the various chartered banks. These shifts of deposits affects the banks ' reserves, and therefore their ability to make overnight loans. Since this tool is typically used on a small scale to smooth daily fluctuations in the amount of overnight loans, its impact on the implementation of monetary policy is small.
The required reserve ratio is the portion of depositors ' balances banks must have on hand as cash, as determined by the central bank. The monetary policy of a required reserve ratio is no longer in use by the Bank of Canada. The Bank of Canada 's policy tools work by changing the quantity of money in the economy, by changing the monetary base.
By raising the bank rate, the Bank of Canada can make it more costly for the banks to borrow reserves. By raising the interest rate it pays the banks on their own deposits at the Bank of Canada, it can induce the banks to want to hold larger reserves. By selling securities in the open market, the Bank of Canada can decrease the monetary base. The Bank of Canada