Record Details

Monetary Policy under Zero Reserve Requirement in Canada

Economic Journal of Emerging Markets

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Field Value
 
Title Monetary Policy under Zero Reserve Requirement in Canada
 
Creator Afandi, Akhsyim; Fakultas Ekonomi Universitas Islam Indonesia
 
Subject Economic
monetary policy
—
 
Description Current development shows that financial system tends to move to the direction where controls over banking system would be very minimum. Banks are no longer required to hold afraction of their assets as required reserve with the central bank, and deposits are not subject to interest rate regulation. Fama (1980, 1983) argues that with the absence of reserve ratio price determinacy still holds through the control over currency supply. However, recent development also indicates that the control over currency supply is not any more in the hand of central banks but determined by the demand of the people. Consequently, price level is uncontrollable. Black (1970) even goes further to conclude that the unregulated banking system will bring the traditional monetary theories to an end. This paper deals with the implications of recent development in financial system in Canada. This paper argues that even though there is no longer reserve requirement and currency supply is determined by demand side, the Bank of Canada still has control over nominal magnitude of the economy, namely interest rates, which in turn influence aggregate demand and prices.
 
Publisher Universitas Islam Indonesia
 
Contributor —
 
Date 2016-03-14
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Identifier http://journal.uii.ac.id/index.php/JEP/article/view/4269
 
Source Economic Journal of Emerging Markets; Vol 2, No 1 (1997); 47-56
2502-180X
2086-3128
 
Language INA
 
Coverage developing countries
monetary policy
Zero Reserve Requirement in Canada
 
Rights Copyright (c) 2016 Economic Journal of Emerging Markets