1. AP/ECON 3430 3.0 Monetary Economics I Fall 2016
Topic 9A: Central Banking
Guest Lecturer: Mr. Reed Collis
(Tuesday Nov 15th)

2. What is a central bank?
Functional definition: A central bank is a financial institution that may…
act as a bank for the government
act as a bank for other banks
conduct monetary policy
supervise deposit banks
act as a lender of last resort to deposit banks
issue bank notes, usually with a monopoly on that issue
set the external price of the nation’s currency (fix the exchange rate)

3. Who owns a central bank?
It may be owned by the government/state and operated as a public institution
or it may be owned by shareholders and operated as a private, for-profit company
Legally, it is the central monetary authority
It may be free to set its policies independently of the government
or its policies and its management may be directed by the government

4. What does a Central Bank do?
(1) As the government’s banker, managing the government’s debt portfolio, it buys and sells government debt in the money and capital markets
(2) As a bank for deposit banks and a lender of last resort to deposit banks, the rate at which it is willing to lend will exert strong influence on the administered rates and the amount of lending will influence bank reserves
(3) with its own stock of FX reserves, the central bank can buy/sell FX directly to influence ER

5. Opposing Views of the Bank of Canada
“Bank of Canada: Count on Us”
(10 min)
Rocco Galati and the lawsuit against the Bank of Canada (2015) Interview with Amanda Lang (CBC) (17 min)

6. Alternative Reference to Cecchetti and Redish, Chapter 15
Chapter 15 is omitted from the e-book. As an alternative source of information about the Bank of Canada and its operation, please visit the Bank of Canada’s website at: