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Ebook The economics of money, banking, and financial markets (6/E): Part 2

Part 2 book “The economics of money, banking, and financial markets” has contents: Central banks and the bank of Canada, the money supply process, tools of monetary policy, the foreign exchange market, the international financial system, aggregate demand and supply analysis, monetary policy theory, and other contents. | www.downloadslide.net PART 5 M14A_MISH7388_06_SE_P05.indd 341 Central Banking and the Conduct of Monetary Policy Chapter 14 Chapter 15 Chapter 16 Chapter 17 Central Banks and the Bank of Canada The Money Supply Process Tools of Monetary Policy The Conduct of Monetary Policy: Strategy and Tactics Crisis and Response: The Bank of Canada and the Global Financial Crisis The onset of the subprime financial crisis in August 2007 was a curve ball for central banks around the world. The global financial crisis, described by former Federal Reserve Chairman Alan Greenspan as a “once-in-a-century credit tsunami,” had the potential to devastate the world economy. The Bank of Canada resolved to come to the rescue of the Canadian economy. Starting in September of 2007, the Bank of Canada enacted monetary policy at a rapid rate by reducing the overnight interest rate. Specifically, the Bank lowered the overnight rate target in December by 25 basis points (0.25 percentage points) from 4.50% to 4.25%, and eventually drove the overnight rate target down to 0.25% by April of 2009. At the same time, the Bank of Canada implemented large liquidity injections into the credit markets to try to get them lending again. Over the course of the crisis, the Bank broadened its provision of liquidity to the financial system well outside of its traditional lending to depository institutions. The number of new Bank of Canada instruments over the course of the crisis spawned a whole new terminology, including term PRAs, quantitative easing, and credit easing, making the Bank of Canada sound like the military with code-named initiatives and weapons. Like the military, the Bank of Canada was fighting a war, although its weapons were financial rather than guns, tanks, or aircraft. The recent global financial crisis demonstrated the importance of central banks like the Bank of Canada to the health of a nation’s financial system and the economy. Chapter 14 outlines what central banks are trying to achieve,