Jill Vardy said on Friday that the Bank of Canada has not joined other central banks to increase liquidity due to the good market condition. The markets and institutions of central banking in Canada are different and better than elsewhere. In countries like U.S. Federal Reserve, The European Central Bank, and the Swiss National Bank all announced a boost in their liquidity of Friday. The amounts of pressure in Canadian money markets are relatively small compared to those in United States and Europe. That is why the Bank of Canada has yet to join with other central banks to increase liquidity. In general, Canadian interbank market is much less than they are internationally.
Relations to Chapter 7: Canadian Money supply, demands / supply for money, and responsibilities of the Bank of Canada
This article talks about the supply of Canadian money. We can see in that they have used the formula, change in the money supply is equal to excess reserves over reserve ratio, to determine the amount of money they need. In t his case the Bank of Canada does not join with the other central banks in boosting liquidity because they already have enough money on the market to going around. The market conditions are active and in good shape, which means less money are being stored into savings account and more money is on the market. When there is more money on the market the Bank of Canada does not have to liquidate their liquid assets to lend money out to people.
I think the bank of Canada has made a good decision in not joining the central bank so early to convert all their liquid assets. Supply more money without the demand is just useless. Therefore, leaving the assets as the way it is will be the best thing to do. The Bank of Canada will need to make sure the demand and supply for money are the same. This way there can be a maximum increase in GDP.
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