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Inflation Targets Versus International Monetary Integration: A Canadian Perspective

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Abstract

The 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.

Suggested Citation

  • David Laidler, 2002. "Inflation Targets Versus International Monetary Integration: A Canadian Perspective," University of Western Ontario, Economic Policy Research Institute Working Papers 20023, University of Western Ontario, Economic Policy Research Institute.
  • Handle: RePEc:uwo:epuwoc:20023
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    1. Marzo, Massimiliano & Strid, Ingvar & Zagaglia, Paolo, 2009. "Nonlinearity in monetary policy: A reconsideration of the opportunistic approach to disinflation," Structural Change and Economic Dynamics, Elsevier, vol. 20(4), pages 288-300, December.

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    More about this item

    Keywords

    monetary policy; exchange rates; central banks; inflation;
    All these keywords.

    JEL classification:

    • 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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