the economics of money, banking, and financial markets

528 #

© 2014 Pearson Canada Inc.#

20. 
    

    Explain the Bank of Canada's open market operations? What are SPRAs and SRAs? How are
    they used to impact the overnight rate?
    Answer: SPRA is special Purchase and Resale Agreement and SRA is a Sale and Repurchase
    Agreement. SPRAS are used to relieve undesired upward pressure on the overnight interest rate.
    SRAs alleviated undesired downward pressure on the overnight financing rate. Both are
    temporary measures.
    Diff: 2 Type: SA Page Ref: 415 - 417
    Skill: Recall
    Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
    policy

    
    


21. 
    

    What are the advantages of SPRAs and SRAs?
    Answer:

    
    

1. The Bank of Canada has complete control over them as they occur at the initiative of the Bank
   of Canada.


2. They are flexible and precise; together with the Bank's standing facilities they can be used to
   any extent.


3. They are easily reversed.


4. They can be implemented quickly.
   Diff: 3 Type: SA Page Ref: 417
   Skill: Recall
   Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
   policy