Inflation Targets Versus International Monetary Integration: A Canadian Perspective
AbstractThe 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.
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Bibliographic InfoPaper provided by University of Western Ontario, Economic Policy Research Institute in its series University of Western Ontario, Economic Policy Research Institute Working Papers with number 20023.
Date of creation: 2002
Date of revision:
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Postal: Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/epri_workingpapers.html
monetary policy; exchange rates; central banks; inflation;
Other versions of this item:
- Laidler, David, 2005. "Inflation targets versus international monetary integration: a Canadian perspective," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 35-64, March.
- David Laidler, 2002. "Inflation Targets Versus International Monetary Integration - A Canadian Perspective," CESifo Working Paper Series 773, CESifo Group Munich.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- 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
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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