Inflation Targets Versus International Monetary Integration: A Canadian Perspective

David Laidler

No 20023, University of Western Ontario, Economic Policy Research Institute Working Papers from University of Western Ontario, Economic Policy Research Institute

Abstract: The debate about whether Canada should seek some form of monetary integration with the United States is surveyed. It is argued that the choice here is among overall monetary orders, rather than among exchange rate regimes considered in isolation, with particular attention needing to be paid to questions of the credibility of policy and the accountability of policy makers. Canada's recent economic performance under its current monetary order -- inflation targets, underpinned by a flexible exchange rate, and pursued by accountable policy makers -- is assessed, and arguments that the flexible exchange rate has undermined the economy's real performance are analysed. Alternative orders are considered. It is concluded that the most economically attractive among them -- negotiated adoption by Canada of the US dollar with provision being made for meaningful Canadian input into policy decisions and the supervision and oversight of the monetary system -- is not politically attainable, and that the economic and political drawbacks associated with intermediate arrangements are large enough to render them clearly inferior to Canada's current monetary order.

Keywords: monetary policy; exchange rates; central banks; inflation (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 F33 (search for similar items in EconPapers)
Date: 2002
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Related works:
Journal Article: Inflation targets versus international monetary integration: a Canadian perspective (2005)
Working Paper: Inflation Targets Versus International Monetary Integration - A Canadian Perspective (2002)
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