tag:blogger.com,1999:blog-2499715909956774229.post2519566447226843315..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: Canadian Monetary PolicyStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-2499715909956774229.post-63843732579049839582018-01-19T08:00:42.742-08:002018-01-19T08:00:42.742-08:00Oops, got the wrong link: In Canada, interbank tra...Oops, got the wrong link: In Canada, interbank transfers are done through the LVTS system: http://www.bankofcanada.ca/core-functions/monetary-policy/lvts/<br /><br />LVTS has 16 participants - they can borrow from the Bank of Canada, and hold deposits (reserves) at the Bank. And they all get interest on reserves balances, so no issues of some institutions with reserve accounts not getting interest, as with the GSEs in the US. There is group of fringe financial institutions - credit unions and trust companies - which are small. But otherwise, the Canadian system is dominated by a few large chartered banks. You're right that what we would call shadow banking is a smaller issue in Canada. As well, there is not a counterpart of the money market mutual fund industry in Canada, which evolved in the US due to the nature of regulations on commmercial banks and other financial institutions.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-47804204719886272212018-01-19T07:58:30.826-08:002018-01-19T07:58:30.826-08:00This comment has been removed by the author.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-82384769551676528202018-01-19T06:32:58.731-08:002018-01-19T06:32:58.731-08:00``The actual mechanics of monetary policy implemen... ``The actual mechanics of monetary policy implementation are considerably different. There is an overnight market in which the Bank of Canada intervenes, but there is a small number of participants in this market. As well, the Bank operates in an environment in which overnight reserves are essentially zero.''<br /><br />The large commercial banks lend to the small ones in the overnight market and the interest rate on reserves effectively sets a floor under the overnight rate in Canada. In contrast, the financial frictions make all the difference in the US in a way that the Federal Home Loan Banks account for majority of lending and the branches of foreign banks account for majority of borrowing in the overnight market. These financial frictions (like federal deposit insurance fee) seem to emerge from the regulatory differences between commercial banks and shadow banks. Then it is not unreasonable to say that unconventional banking sector has a smaller effect on monetary policy implementation in Canada than US. Why is that? If the solution is regulating larger array of economic institutions, why does not US follow it? Anonymoushttps://www.blogger.com/profile/17974910528536453844noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-58101216355867795962018-01-18T13:11:59.685-08:002018-01-18T13:11:59.685-08:00"If you were in charge of setting up a centra..."If you were in charge of setting up a central bank bank, what would you choose? The BoC's one voice or the many-voiced Fed?"<br /><br />The dissent within the Fed system is healthy. In some central banks, promotion can depend on how well you treat your superiors - there isn't a big payoff to asking tough questions. In the Fed system the decentralization breeds competitive ideas, and alternative ways of looking at the world. The downside can be in public relations. Sometimes the public can get confused if the central bank speaks with many voices. That's what's behind the long blackout periods the Fed has. If people are restricted from speaking in public for a period of time around policy meetings, that might clarify the message. Of course it also means that there is less public discussion of what the central bank is doing, and fewer opportunities for the public and people in the media to ask questions.<br /><br />"Why is central banking so politicized in the U.S. while up here it's a non-issue?"<br /><br />In the US there was a lot of resistance to central banking from the beginning. In fact, there were two failed attempts at creating a central bank - the First and Second Banks of the United States. The Second was killed off by Andrew Jackson. The reason the Fed is structured as it is was due to suspicion in the US of centralized power, and of the government as well - the Fed is both decentralized and quasi-private. I'm not sure anyone had a problem with the Bank of Canada at the outset. I'm guessing that, in 1935, when everyone was very focused on ties to the UK, a proposal that we have an institution like the Bank of England wouldn't have kept anyone awake at night.<br /><br />Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-53537777794742184952018-01-18T09:08:38.002-08:002018-01-18T09:08:38.002-08:00"The top Bank of Canada officials are somewha..."The top Bank of Canada officials are somewhat shy. They don't speak in public as much as, for example, Jim Bullard, the President of the St. Louis Fed. As well, Bank of Canada officials generally speak with one voice. Public dissent is not a thing.."<br /><br />If you were in charge of setting up a central bank bank, what would you choose? The BoC's one voice or the many-voiced Fed?<br /><br />Why is central banking so politicized in the U.S. while up here it's a non-issue? For instance, there's an End the Fed movement, but no End the Bank of Canada campaign. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com