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Canadian Economy.doc

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Administrative Studies
ADMS 1010
Rebecca Jubis

Canadian Economy (Cyclical expansions of 3 stages) • Demand for consumer goods, infrastructure expenditures, housing, strong immigration. Inflation↑ , unemployment↓ • Recession: government heavily invest in defence. Inflation↑ , unemployment↑ • Canadian dollar appreciated. Inflation↓ , unemployment↑ Bank of Canada • The goal of monetary policy is to rising living standards for all Canadians through low and stable inflation. • Graham Towers (governor) not actively pursue on monetary policy, he only changed the bank rate twice. • Later took over by Coyne (governor), he changed the bank rate 6 times and raising it each time. Coyne (Liberal) • Coyne emphasized the impact of inflation, encouraged economic growth and eliminated unemployment. • He continue to against inflation, because Inflation causes inefficiency, injustice, produce recession. • To the bankers: He demanded the bank has to have 15% liquidity ratio and 8% cash reserve. • This high ratio made the bank become less flexible and led the central bank to have full control of charter banks’ asset. • Later, he replaced the fixed bank rate with a floating rate, because 1) a rate higher than market rate can discourage borrowing, 2) floating rate can respond quickly to changes in market. • Also, he proposed that the banks have to create new saving banks to fund long- term investment. • Although bankers opposed this implementation, they had little choice but to comply. Government changed to Conservative ( under John Diefenbaker) • Donald M. Fleming who was a finance minister, against Coyne’s ideology of inflation and rising bank rate. • The Bank
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