Case 7: The “Coyne Affair”
1. What could have Coyne done differently in order to achieve his goals?
A: Coyne’s goal was to encourage overall economic growth on a sound and facilitate economic
development with a view to increasing employment opportunities and eliminating
unemployment or reducing it to the lowest possible level.
Coyne concerned about LOW savings rate and HIGH rate on foreign investment.
While coyne wanted to introduce minimum 15 percent LIQUIDITY RATIO
Bankers think the ratio was too high. It would immobilize too many assets, inaccessible in the
event of need -> less flexible and less responsive
2. Could the PM and the finance minister handled the situation differently? If so, how. (GOVT vs.
A: PM thought the rates were too high. However, FM thinks that this is no default of Coyne. T-
bill was set in the free market, not Coyne. Coyne argued that the government was overspending
and BANK OF CANADA could not achieve economic stability.
Bank of CANADA was blamed for: 1955-1957 -> inflationary period -> bizmen difficult to obtain
the credit -> recession in 1957 and 1958 -> bank did not pursue an active policy of monetary
ease and expansion -> tight money, high interest rates and hig