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A new consensus on monetary policy?

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  • Edwin Le Heron

Abstract

By analyzing the documents issued by the Bank of Canada, an original monetary policy can be seen. The Canadian monetary policy tries to maintain its autonomy, whilst at the same time respecting floating exchange rates. The numerous innovations are the foundation of a New Consensus on monetary policy. Far from the dilemma rule versus discretion of the former Monetarist and Keynesian methods, a new dilemma will be the focus: that of credibility versus confidence. Here, the anticipations of the economic agents, the behavior of financial markets and the price of assets play a dominating role. Based on the innovative experiment of the Bank of Canada during the 1990s, the characteristics of the New Consensus will be explained. Far from making independent central banks some high-powered institutions, it shows them instead to be “statues with feet of clay”. JEL Classification: E50; E52; E58; N42.

Suggested Citation

  • Edwin Le Heron, 2003. "A new consensus on monetary policy?," Brazilian Journal of Political Economy, Center of Political Economy, vol. 23(4), pages 505-530.
    • Handle: RePEc:ekm:repojs:v:23:y:2003:i:4:p:505-530:id:913
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    References listed on IDEAS

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    1. Gordon Thiessen, 1995. "Uncertainty and the transmission of monetary policy in Canada (HERMES-Glendon Lecture) [speech]," Bank of Canada Review, Bank of Canada, vol. 1995(Summer), pages 41-58.
    2. John B. Taylor, 2000. "Teaching Modern Macroeconomics at the Principles Level," American Economic Review, American Economic Association, vol. 90(2), pages 90-94, May.
    3. Edwin Le Héron, 2001. "La préférence pour la liquidité des banques : une analyse post-keynésienne du comportement bancaire," Post-Print halshs-00160013, HAL.
    4. Luiz Carlos Bresser-Pereira & Yoshiaki Nakano, 2003. "Economic growth with foreign savings?," Brazilian Journal of Political Economy, Center of Political Economy, vol. 23(2), pages 163-188.
    5. M. Akbar Akhtar, 1994. "Monetary policy effects on long-term interest rates: a critical survey of the empirical evidence," Research Paper 9407, Federal Reserve Bank of New York.
    6. Kevin Clinton, 1997. "Implementation of Monetary Policy in a Regime with Zero Reserve Requirements," Staff Working Papers 97-8, Bank of Canada.
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    Cited by:

    1. Robson Rodrigues Pereira, 2004. "Comunicação Em Política Monetária," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 029, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Elaine Cristina de Piza & Joilson Dias, 2006. "Novo Consenso Macroeconômico E Política Monetária No Brasil: Uma Avaliação Empírica," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 164, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    More about this item

    Keywords

    Central banking; monetary policy; inflation targeting; Bank of Canada; credibility versus confidence;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-

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