IDEAS home Printed from
   My bibliography  Save this article

Canada and the IMF: Trailblazer or Prodigal Son?


  • Michael Bordo


  • Tamara Gomes


  • Lawrence Schembri



Canada played an important role in the postwar establishment of the International Monetary Fund (IMF), yet it was also the first major member to challenge the orthodoxy of the BrettonWoods par value system by abandoning it in 1950 in favour of a floating, market-determined exchange rate. Although the IMF heavily criticized this decision, Canada's trail-blazing experience demonstrated that a flexible exchange rate could operate in a stable and effective manner under a high degree of capital mobility. Equally important, it showed that monetary policy needs to be conducted differently under a flexible exchange rate and capital mobility. The remarkable stability of the dollar during the 1950s contradicted previous wisdom on floating exchange rates, which had predicted significant volatility. In May of 1962, Canada returned to the BrettonWoods system as a "prodigal son" after a period of controversial monetary policy and a failed attempt to depreciate the value of the Canadian dollar. The authors critically analyze the interaction between Canadian and IMF officials regarding Canada's exchange rate policy in view of the economic circumstances and the prevailing wisdom at the time. They also examine the impact on IMF research and policy, because the Canadian experience influenced the work of Rudolf Rhomberg as well as Robert Mundell and Marcus Fleming, resulting in the development of the Mundell–Fleming model. Thus, the Canadian experience with a floating exchange rate not only had important implications for the IMF and the BrettonWoods system, but also for macroeconomic theory and policy in open economies.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Michael Bordo & Tamara Gomes & Lawrence Schembri, 2010. "Canada and the IMF: Trailblazer or Prodigal Son?," Open Economies Review, Springer, vol. 21(2), pages 309-333, April.
  • Handle: RePEc:kap:openec:v:21:y:2010:i:2:p:309-333
    DOI: 10.1007/s11079-009-9134-8

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. James M. Boughton, 2003. "On the Origins of the Fleming-Mundell Model," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 1-1.
    2. Michael D. Bordo & Angela Redish, 1990. "Credible Commitment and Exchange Rate Stability: Canada's Interwar Experience," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 357-380, May.
    3. Michael D. Bordo, 1993. "The Bretton Woods International Monetary System: A Historical Overview," NBER Chapters,in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 3-108 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Angela Redish & Olga Marcela Namen, 2012. "Central Banks: Past, Present, Future," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(67), pages 14-35.
    2. Rockoff, Hugh & White, Eugene N., 2012. "Monetary Regimes and Policy on a Global Scale: The Oeuvre of Michael D. Bordo," MPRA Paper 49672, University Library of Munich, Germany, revised May 2013.

    More about this item


    IMF; Monetary policy; Capital mobility; Exchange rate policy; Mundell-Fleming model; F41; F55; N12; E52; E58;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-
    • 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:kap:openec:v:21:y:2010:i:2:p:309-333. 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: (Sonal Shukla) or (Rebekah McClure). 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.