Monetary Policy

This article is part of the EconHelp Tutoring Wiki

In economics, monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest to attain a set of objectives oriented towards the growth and stability of the economy.

Central Banking

-History

The Bank was created by the Bank of Canada Act in 1934 and started operations in 1935.

It has regional offices in Toronto, Vancouver, Calgary, Montreal and Halifax.

Bank of Canada is responsible for the country's monetary policy and for the regulation of Canada's deposit-based financial institutions.

-Structure

It consists of 15 members: the governor, the senior deputy governor, the deputy minister of finance and twelve outside directors.

-Functions

bank note issue

government debt and asset management services

central banking services, and

monetary policy management

-Services

Serves as the lender of last resort

has explicit responsibility for the regulatory oversight of the national payments system

acts as the holder of deposit accounts of the federal government

-The Bank has instrument independence but not goal independence

Recent research shows that more independent central banks are better able to contain inflation and not at the expense of output fluctuations and high unemployment.

Monetary Policy

The bank employs tools such as

open market operations (purchase/sale of government bonds)

shifting of government balances between it and the direct clearing members of the CPA to implement changes in the money supply.

Back to EconHelp