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Revisiting the Coyne Affair: a singular event that changed the course of Canadian monetary history

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  • Pierre L. Siklos

Abstract

The Coyne Affair occurred during the 1959–61 period and led to the resignation of the governor. Eventually major reforms of the Bank of Canada Act were enacted. Archival and empirical evidence is used to assess the performance of monetary policy throughout the 1950s. In doing so, a real‐time data set is constructed for both Canada and the US that permits the estimation of a reaction function. I find that while the case against James Coyne is ‘not proven,’ there was a brief period when monetary policy was excessively tight, and this may well have worsened an already weak economic environment. L’affaire Coyne a eu lieu au cours de la période 1959–61 et a conduit à la démission du Gouverneur de la Banque du Canada. Éventuellement, des réformes majeures à la Loi sur la Banque du Canada ont été mises en œuvre. On utilise des documents d’archives et des résultats empiriques pour évaluer la performance de la politique monétaire dans les années 1950. Ce faisant, on construit une base de données en temps réel pour le Canada et les États‐Unis qui permet de faire l’estimation d’une fonction de réaction. On découvre que même si l’argumentation développée contre Coyne n’est pas prouvée, il y a eu une courte période durant laquelle la politique monétaire a été excessivement restrictive et que cela peut fort bien avoir entrainé la détérioration d’une économie déjà affaiblie.

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  • Pierre L. Siklos, 2010. "Revisiting the Coyne Affair: a singular event that changed the course of Canadian monetary history," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(3), pages 994-1015, August.
    • Handle: RePEc:wly:canjec:v:43:y:2010:i:3:p:994-1015
    DOI: 10.1111/j.1540-5982.2010.01603.x
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    Cited by:

    1. Michael D. Bordo & Pierre L. Siklos, 2015. "Central Bank Credibility: An Historical and Quantitative Exploration," NBER Working Papers 20824, National Bureau of Economic Research, Inc.
    2. William B.P. Robson, 2009. "To the Next Level: From Gold Standard to Inflation Targets - to Price Stability?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 285, March.
    3. William R. White, 2013. "Is Monetary Policy a Science? The Interaction of Theory and Practice over the Last 50 Years," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 3, pages 73-116, SUERF - The European Money and Finance Forum.
    4. Siklos, Pierre L., 2009. "Not quite as advertised: Canada's managed float in the 1950s and Bank of Canada intervention," European Review of Economic History, Cambridge University Press, vol. 13(3), pages 413-435, December.
    5. Richard C.K. Burdekin & King Banaian & Mark Hallerberg & Pierre L. Siklos, 2011. "Fiscal and monetary institutions and policies: onward and upward?," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 3(4), pages 340-354, November.
    6. Lars Osberg, 2018. "Full Employment in Canada in the early 21st Century," Working Papers daleconwp2018-02, Dalhousie University, Department of Economics.

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    More about this item

    JEL classification:

    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • 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
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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