Question

In response to COVID-19, the Bank of Canada has announced several stimulus programs, that include the:

1. Provincial Bond Purchase Program

2. Money Market Purchase Program

How do you think that these programs will impact bond/money markets? What is the likely impact of these programs on government's borrowing requirements, given large forecasted budget deficits.

Answer 1

In response to COVID-19 the bank of Canada has announced several stimulus programmes that include:

1- Provincial bond purchase program This program is basically initiated by the government to increase the money supply in the economy.

Under this programme when the government purchases the bond from the public then it increases the money flow in the economy which finally affects the purchasing power of the consumer and it will help to combat and to cover the economic condition in this pandemic situation.

2. Money market purchase programme is also very effective to increase the money supply in the economy. All such things are helpful in increasing the circulation of money in the economy. It is very essential for the overall rise of all the sectors in the economy.

It will help in the purchasing power of the person and it is also helpful in the formation of job creation in the economy.

In my opinion, these programs will impact bond and money market in a positive sense and in this programme impact the government borrowings requirement because all the above-stated programs required government expenditure and it is very essential for the government to cover all the expenditure with the help of the extra borrowings and if the government is going to take the extra borrowings from the financial institutes then the budget deficit will definitely rise in the economy