How effective is unconventional monetary policy in Canada?

michal2By¬†Michal Ksawery Popiel, JDI Student¬†Fellow, Queen’s University

In normal times, the Bank of Canada stimulates the economy by lowering the target for the overnight interest rate, encouraging borrowing and spending. However, interest rate movements are restricted below by an effective lower bound (ELB) — a point at which investors would withdraw their money from banks because they prefer to hold cash for a return of 0 percent. Once it is reached, central banks must turn to other, unconventional measures to influence economic conditions.Read More »