Canadian Post-War Monetary Policy, 1946–52

In: Canadian journal of economics and political science: the journal of the Canadian Political Science Association = Revue canadienne d'économique et de science politique, Band 20, Heft 2, S. 207-226

Abstract

The purpose of this paper is to analyse and evaluate Canadian post-war monetary policy, in the light of the recurring inflationary pressures to which the economy was subjected. In the evaluation of past events, even the least perceptive critic possesses two great advantages, that is, published statistical data and the revelations of hindsight. When rightly used, hindsight is a valuable guide, but the critic must be careful to distinguish two significant questions: (1) In the light of the relevant contemporary circumstances, what alternatives were available to policy-makers at the time decisions were made? (2) What were the merits or demerits of the policies adopted, when viewed in the light of subsequent events, that is, given the same problem again, would different policies be adopted?Any analysis, to be useful, must guard against oversimplification and unrealistic abstraction, and it is therefore impossible to evaluate Canadian postwar monetary experience fairly unless the analysis moves beyond the consideration of primarily domestic influences to an adequate recognition of the economic difficulties posed by violent shifts in our balance of payments. The following criticism of specific aspects of Canadian policy does not imply any over-all condemnation, for although we may deplore the damage which inflation has wrought, it must be admitted that its post-war development in this country has been relatively moderate, despite the substantial limitations imposed upon Canadian monetary policy by our open economy.