5-2 Milestone Two: Central Banking and Monetary Policy Draft

Chosen Bank: Bank Of CanadaOverview

In Project Two, you will write an informative research paper comparing and contrasting the structure and operation of the central bank of the United Statesthe Federal Reserveand the central bank of another country. For this milestone, analyze and write about the central banking and monetary policies of the Federal Reserve and the foreign central bank that you selected in Milestone One.

Directions

You are in your new role as a junior economist at the think tank or research institute focused on monetary policy. You submitted your first draft to your supervisor. You now need to provide more context about the impact of current macroeconomic conditions and monetary policy.

Use the foreign central bank you selected in Milestone One. Analyze the current macroeconomic conditions in both the foreign country and the United States to answer the following questions:

• What are the current growth rates of the GDP in both economies?
• Are the inflation paths over the last two years similar or quite different?
• Is the rate of inflation in each economy having a positive or negative impact on GDP growth and unemployment?

Compare the performance of the selected foreign central bank with the U.S. Federal Reserve. Use this information to answer the following questions:

• What are the monetary policy actions of each central bank over the last two years?
• Are the central banks maintaining a loose or tight stance on the growth of money supply and credit? Or are they trying to control it?
• How are central banks using policy tools to achieve their goals?
• Are the banking regulations of these central banks similar or very different?
• Have these regulations provided confidence in the banking system to allow for economic growth?

Specifically, you must address the following rubric criteria:

II. Central Banking: Explain the current macroeconomic conditions (unemployment, inflation, and economic growth [GDP] rates) that the Federal Reserve and the central bank you have chosen observe in each country, and compare the performance of the two countries.

III.Monetary Policy

1. Explain the primary tools used by the central bank and the Federal Reserve to control the money supply in each country.

**Note the example from the Bank of Canada website where you can find primary tools information:

1. Go to the website and click Core Functions. Then click Monetary Policies. Other central bank websites will likely be similar.
2. Describe how each monetary authority uses these tools to impact macroeconomic performance.
3. Compare the banking regulations of the central bank you have chosen and the Federal Reserve.

What to Submit

Your paper must be submitted as a 3- to 4-page Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and at least four sources cited in APA format.