Monetary Policy and Central Bank Independence : The Bank of Canada and Responsible Government

What does economic theory say about the existence and constitutional position of Canada's Central Bank - or of any central bank?

Should central banks be discarded? Should they be effectively independent of the government or become a Department of Monetary Affairs, just another integral part of modern democratic government?

In the late 1950s and early 1960s H. Scott Gordon and other economists participated in a famous debate between the governor of the Bank of Canada and the government over monetary policy and the constitutional position of the Bank in Canada.

During and since the "Coyne Affair", Gordon has been concerned with the fundamental questions raised by this issue.

This volume, which contains a reprint of his famous pamphlet "The Economists versus the Bank of Canada" as well as two other articles by him and others, examines and extends his views on monetary theory and policy and the constitutional position of the Bank of Canada.

In the 1980s and early 1990s many market economies experienced historically high inflation rates. Though inflation seems to have been brought under control by central banks such as the Bank of Canada, in several cases it appears that it was the aberrant behaviour of these central banks that generated the inflation in the first place.

Can government-owned central banks be relied on to produce price stability?

Are they also responsible for real economic variables such as unemployment rates and rates of real economic growth?

Advocates of laissez-faire banking say no and advocate the dismantling, if not the elimination, of central banks.

Others rely upon special devices, such as the Coyne-Rasminsky Directive, to maintain, within the context of parliamentary democracies, ultimate responsibility for monetary policy with the central government.

Can we get help from economic or political theory in determining what the constitutional position of the Bank of Canada should be?

This work contributes to the world-wide debate on what monetary policy can do and how central banks should be governed.

The contributors include: H. Scott Gordon, Peter Howitt, Larry Read, Thomas K. Rymes and Stanley L. Winer.