IDEAS home Printed from
   My bibliography  Save this article

Financial Stability: The Next Frontier for Canadian Monetary Policy


  • Christopher Ragan

    (McGill University)


The monetary policy arrangement in Canada has proven very successful. Despite many and varied economic shocks, the Bank of Canada has established the necessary conditions under which the annual rate of inflation, as measured by the rate of change of the Consumer Price Index, has remained very close to its formal 2 percent target for more than 15 years. The recent financial crisis, however, has highlighted the fact that low inflation may not be enough to ensure the stability of the financial system and the economy in general. The goal of achieving and maintaining financial stability has become, in Canada and elsewhere, the next frontier of monetary policy. What is needed is a new Canadian institutional framework to oversee macro-prudential regulation, which would take a systemic approach to safeguarding the financial system as a whole, and clearly define the role of the Bank of Canada within it. It will require the federal government, first, to recognize the importance of the issue and, second, to take the necessary time to assemble the framework with the appropriate parties involved and to assign responsibilities clearly. Doing it right will involve bringing together various policy authorities with different perspectives, specialties, and primary mandates.

Suggested Citation

  • Christopher Ragan, 2012. "Financial Stability: The Next Frontier for Canadian Monetary Policy," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 338, January.
  • Handle: RePEc:cdh:commen:338

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    2. Carmen M. Reinhart & Vincent Reinhart, 2010. "After the fall," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 17-60.
    3. Benjamin Dachis & William B.P. Robson, 2011. "Holding Canada's Cities to Account: an Assessment of Municipal Fiscal Management," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 145, November.
    4. Colin Busby & David Gray, 2011. "Mending Canada's Employment Insurance Quilt: The Case for Restoring Equity," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 144, November.
    5. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
    6. David Longworth, 2002. "Inflation and the Macroeconomy: Changes from the 1980s to the 1990s," Bank of Canada Review, Bank of Canada, vol. 2002(Spring), pages 3-18.
    7. Laidler, David, 1999. "The Exchange Rate Regime and Canada's Monetary Order," Staff Working Papers 99-7, Bank of Canada.
    8. Ragan, Christopher, 1998. "On the Believable Benefits of Low Inflation," Staff Working Papers 98-15, Bank of Canada.
    9. Philippe Bergevin & David Laidler, 2010. "Putting Money Back into Monetary Policy: A Monetary Anchor for Price and Financial Stability," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 312, October.
    10. James P. Feehan, 2012. "Newfoundland's Electricity Options: Making the Right Choice Requires and Efficient Pricing Regime," e-briefs 129, C.D. Howe Institute.
    11. Alexandre Laurin & William B.P. Robson, 2011. "Ottawa's Pension Gap: The Growing and Under-reported Cost of Federal Employee Pensions," e-briefs 127, C.D. Howe Institute.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Monetary Policy; Bank of Canada; inflation targeting; Consumer Price Index (CPI);

    JEL classification:

    • 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


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdh:commen:338. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kristine Gray). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.