Importance of the Overnight Interest Rate

The Importance of the Overnight Interest Rate

The Bank of Canada pays banks a low interest rate on their reserve

Don't use plagiarized sources. Get Your Custom Essay on
Importance of the Overnight Interest Rate
Just from $10/Page
Order Essay

deposits, which (during normal times) is the bank rate less 50 basis points, i b − 0.50, so banks normally have an incentive to invest reserves above the desired amounts.

The Bank of Canada does not set the overnight interest rate. Instead, it sets an

operating band of 50 basis points wide for the overnight interest rate, and the rate is determined by the supply of reserves relative to the demand for them.

Choosing a Monetary Policy Target

There are many different interest rates in the economy, but for purposes of monetary policy, the Bank of Canada has targeted the interest rate known as the overnight interest rate.

The overnight interest rate is the interest rate banks charge one another on loans in the overnight funds market. The loans in that market are usually very short term, often just overnight.

‹#› of 54

Copyright © 2015 Pearson Canada Inc.

19

LO11.2

 

Use aggregate demand and aggregate supply graphs to show the effects of monetary policy on real GDP and the price level.

11.3 LEARNING OBJECTIVE

Monetary Policy and Economic Activity

Open market buyback operations – Agreements in which the Bank of Canada, or another party, purchase securities with the understanding that the seller will repurchase them in a short period of time, usually less than a week.

‹#› of 54

Copyright © 2015 Pearson Canada Inc.

LO11.3

 

20

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

Read more

Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Open chat
1
You can contact our live agent via WhatsApp! Via +1 817 953 0426

Feel free to ask questions, clarifications, or discounts available when placing an order.

Order your essay today and save 30% with the discount code STARS