Historical Evaluation of the Bank of Canada and the Monetary Policy

For nearly a century, the Canadian government showed little interest in creating a central bank. Canada’s economy was small, and ran on a branch-bank network . The branch-bank network had a limited amount of banks, with multiple branches that connected even the most rural areas. This network worked perfectly for Canada, a central bank was simply too large and cost too much in resources for a small rather undeveloped economy, while this system could easily deal with demand without strain.
Unfortunately, the branch-bank network could only support Canada’s growing economy for so long. By the 1930s, the Great Depression was well into effect. Canada was hit hard by the Depression due to the influence of its neighbor, the United States of America. Prime Minister Borden once again looked at opening a central bank in Canada and finally in 1935; the Bank of Canada first opened its doors. Originally, it was a privately owned company, and three years after its opening in 1938, the Bank of Canada became a crown corporation when the Canadian government purchased all of its shares. The Bank of Canada’s purpose was to protect the financial well-being of Canada, and it still to this day manages all monetary policy. The point of the Bank of Canada managing the monetary policy is to keep inflation rates stable and as low as possible .
The Great Depression lasted for the majority of the 1930’s. During this time, investors lost all confidence in the economy. Prime Minster Bennett, who served until 1935, received much criticism “over the lack of direct means in Canada for setting up international accounts” . Prime Minister Bennett created the Bank of Canada Act to resolve the major issues that stood in the way of prosperity. There was a need for Can...

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...opened in 1820 and it still runs today. The way banks are run in Canada are other prime example of how successful regulation from the Bank of Canada can be.
Although at times some of the regulations put in place in Canada seem out of step it is this regulation that has allowed Canadians to continue to have a healthy and vibrant economy. The numbers of bankruptcies declared in Canada over the last decade have been largely unchanged due to the requirements for acceptance of credit by the banks. The biggest challenges facing Canada for the future will in fact be moving our economy from a resource based economy to a producer of products. A stable Banking system that is led by a regulated monetary policy will be the first major requirement. Investment in the Canadian economy will only follow if Canada is seen worldwide as having a transparent and trusted banking system.

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