Question: Using the following information, explain how the BOC uses the channel corridor system to achieve their target for the overnight interest rate. Current Rates: Inflation

Using the following information, explain how the BOC uses the channel corridor system to achieve their target for the overnight interest rate. Current Rates: Inflation Rate 5.5%. Rate on Excess Reserves=0.25% Policy Rate=0.50% Bank Rate=0.75%. Assume that the BOC would like the real overnight interest rate to increase by 0.5% and is maintaining a 0.5% operating band.

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