Canadian Monetary Policy 1989-1993: What Were the Bank of Canada's True Actions in the Determination of Monetary Conditions?

Daniel Racette and Jacques Raynauld ()

Canadian Public Policy, 1994, vol. 20, issue 4, 365-384

Abstract: During its recent battle against inflation from 1988 to the present, the Bank of Canada has been accused of all the evils that plagued the Canadian economy: high dollar and interest rates, recession, and slow recovery. The purpose of this paper is to analyse the action taken by the Bank during the period from 1989 to 1993 in order to characterize precisely the way monetary policy was conducted during this period. We find that, contrary to what analysts have usually stated, monetary policy actions were far from tight in 1989. However, from 1990 on, the Bank took a series of restrictive actions in order to discipline financial markets giving an undue importance to its objective of orderly markets to the detriment of monetary expansion.

Date: 1994
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