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The goal of this post is to allow everyone to expand their knowledge of monetary policy, you will learn how the bank of Canada implements and conducts monetary policy, learning a brief history of the Bank of Canada, why it was created and what the role in today's economy is. As well as learning about Monetary Policy, you will also learn about they types of economy and how they are related to Monetary Policy. Finally, you will learn about who is currently the director of the Bank of Canada. All this will be done using pictures and videos, and websites making it more engaging.

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Picture One: The Bank of Canada and Monetary Policy

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Picture One: The Bank of Canada and Monetary Policy

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The bank of Canada is the Central Bank here, it was established in 1935, and controls Monetary Policy. Monetary Policy and the Bank of Canada were a result of the depression when they realized the bank was needed in order to control and stabilizes the economy.
This picture is the Central Bank of Canada and shows its location in Ottawa Ontario

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In this video it gives you a brief introduction of what Monetary Policy is and how it is used. This Video references “Despicable Me” to make the it easier to understand what monetary policy is, why we have it, and how it is used. The point that the video is trying to get across is Monetary Policy is run by the a central bank, in Canada is the Bank of Canada, and the two functions of the bank. The two functions of the bank are to control inflation, and money supply.
I choose this video because they were able to effectively use “Despicable Me” to break down the basics of Monetary Policy. The visuals that had been used were funny but also translates perfectly to Monetary Policy. I think that it was a good introduction video to get a better understanding of Monetary Policy.

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Monetary Policy and the Fed- EconMovies #9: Despicable Me

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Learning the history about the Bank of Canada and Monetary Policy will help you understand why they came to be and learn about their importance and how they have become more important. In the article it goes into depth about how before 1930 and the great depression that Monetary Policy is not needed, and how afterwards it became clear that in order to have control they needed a system that gives them control. It also talks about the governors of the Bank of Canada, why they are needed and list the past one.

I choose this website because knowing the history, like why they were created, who runs its, is helpful in understanding the overall functions of Monetary Policy and the Bank of Canada.

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A Changing Environment

The Great Depression, fuelled by drought conditions and a worldwide economic slump, contributed to a change in government and unprecedented public criticism of Canada's banking system. It also coincided with Prime Minister R.B. Bennett's concern that Canada lacked a direct means for settling international accounts. In 1933, he set up a Royal Commission to study "the organization and working of our entire banking and monetary system [and] to consider the arguments for or against a central banking institution."

The arguments "for" won. The Royal Commission, headed by Lord Macmillan, recommended in its report the establishment of a central bank. A week after the report was made public, the Prime Minister announced that his government would adopt the recommendations.

An appendix to the report, titled "Suggestions as to some of the Main Features of the Constitution of a Central Bank for Canada," became the framework for the Bank of Canada Act, which received royal assent on 3 July 1934. In March 1935, the Bank of Canada opened its doors as a privately owned institution, with shares sold to the public.

Here to Stay

The first Governor of the Bank of Canada was Graham F. Towers, a 37-year-old Canadian who had extensive experience with the Royal Bank of Canada, both in Canada and abroad. He had appeared before the Macmillan Commission on behalf of the chartered banks. He would guide the Bank for 20 years.

Soon after the Bank opened, a new government introduced an amendment to the Bank of Canada Act to nationalize the institution. In 1938, the Bank became publicly owned and remains so today.

The organization of the Bank integrated new functions with functions that already existed elsewhere. Bank note operations were transferred from the Department of Finance when the Bank opened, and the offices of the Receiver General across the country became the agencies of the Bank.

A new Research Division was established to provide information and advice on financial developments and on general business conditions at home and abroad. The Foreign Exchange Division and the Securities Division became operative almost immediately, though the transfer of the Public Debt Division from the Department of Finance was delayed until suitable quarters were available. This did not occur until 1938, following completion of the present Bank of Canada building at 234 Wellington Street. The same building, to which two office towers were added in the 1970s, continues to house the Bank of Canada, although it is currently under renovation until 2017.

The Bank of Canada Act, which defines the Bank's functions, has been amended many times since 1934. But the preamble to the Act has not changed. The Bank still exists "to regulate credit and currency in the best interests of the economic life of the nation."

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The Great Depression, fuelled by drought conditions and a worldwide economic slump, contributed to a change in government and unprecedented public criticism of Canada's banking system. It also coincided with Prime Minister R.B. Bennett's concern that Canada lacked a direct means for settling international accounts.

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Website Two: Governor of the Bank of Canada

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Website Two: Governor of the Bank of Canada

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The Governor of the Bank of Canada, who runs monetary policy, serves terms of 7 years. The current governors name is Stephen Poloz and is from Oshawa Ontario but reside in Ottawa, he has a very extensive financial background. In this article it goes into depth about his work background, and why it has made him qualified to run the Bank of Canada and control Monetary Policy.

I think that knowing who is running and controlling your finances are important especially when they control the whole nation’s well-being and has the power to cause a recession. Looking at the background and qualifications of the person who controls monetary policy is very important and needed.

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In a surprise to many in the financial world, Stephen Poloz is the new head of the Bank of Canada, replacing the prolific Mark Carney. The former President and Chief Executive Officer of Export Development Canada (EDC) has an extensive resume.

Poloz was born in Oshawa, Ontario, though he currently resides in Ottawa with his wife of 36 years, Valarie. He has two children, Jessica and Nickolas, and he is also a grandfather.

Like the man he is replacing, Poloz brings a strong academic background in economics. Poloz holds a Ph.D as well as an M.A. in economics from Western University, and a B.A. (Honours) in economics from Queen's University. He is a graduate of Columbia University's Senior Executive Program, and is a Certified International Trade Professional.

Poloz has worked in both the public and private sectors, including 14 years previous experience with the Bank of Canada during the 1980's and early 1990's.

Prior to his appointment as the new governor of the Bank of Canada, Poloz was President and Chief Executive Officer at Export Development Canada (EDC), a crown corporation and one of Canada's top export credit agencies. In this role, Poloz helped provide insurance, financial services, and consultation for Canadian investors looking to expand their business abroad, as well as international investors looking for direct investment opportunities in Canada. In this role, Poloz worked closely with the Canadian federal government, as well as many prominent Canadian financial institutions.

From 1994 to 1999, Poloz worked with BCA research in Montreal, an independent investment research firm that specializes in economic forecasting for over 90 countries worldwide. He also served as the managing editor of The International Bank Credit Analyst, a monthly economic report produced by BCA which is informally known as the "little grey book" in some economic circles.

In Poloz's previous stint at the Bank of Canada prior to 1994, he served a number of roles including Chief of the Research Department, visiting scholar at the Economic Planning Agency in Tokyo, and the bank's representative at the International Monetary Fund in Washington.

Flaherty made reference to his background in financial and economic forecasting when he announced Poloz to the position.

"Stephen Poloz has a long and distinguished career in the public and private sectors with 30 years experience in financial markets, forecasting and economic policy," Mr. Flaherty said in a statement. "I am confident he has the skills and experience required to lead the Bank of Canada at a time of global economic uncertainty."

The early favourite to replace him had been Tiff Macklem, 51, the second-in-command at the bank who had apparently been groomed for the prestigious post. Indeed, many central-bank watchers described Thursday's news as a stunner.

"Who said that central banking was boring? The choice of Stephen Poloz as the new governor of the Bank of Canada is a huge surprise," CIBC said in a note to clients.

For now, the uncertainty about how Poloz will fare in his new job seems almost as daunting as the uncertainty facing Poloz himself, as he steps out of the shadow of the well-liked Mark Carney.

"The bank's employees are its greatest strength, and thanks to their efforts, the Bank of Canada enjoys a tremendous reputation globally as one of the world's most effective and highly regarded central banks," Poloz said.

"I pledge to do my utmost to live up to the high standards set by those who came before me."
- With files from the Canadian Press
See how Canadians are reacting to the announcement that Stephen Poloz will be replacing Mark Carney as Governor of the Bank of Canada.

See how Canadians are reacting to the announcement that Stephen Poloz will be replacing Mark Carney as Governor of the Bank of Canada.
http://storify.com/EltonHobson/stephen-poloz-named-new-bank-of-canada-head

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In a surprise to many in the financial world, Stephen Poloz is the new head of the Bank of Canada, replacing the prolific Mark Carney. The former President and Chief Executive Officer of Export Development Canada (EDC) has an extensive resume.

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Video Three: Transmission of Monetary Policy 

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Video Three: Transmission of Monetary Policy 

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This side of the video talks about the two instruments that Monetary Policy use. It first looks at how it controls inflation, when the bank increase interest rates borrowing becomes more expensive, borrowing would decrease, and consumption and business investments would therefore decrease. However, the opposite would happen if the bank lower interest rates, borrowing would become more affordable, and business and consumer investment would increase. Money supply follows the rising and lowering interest rates, if the bank reduces money supply interest rates would rise, if they increase money supply, interest rates go down.

This is how monetary policy is controlled thus making it important to know, we already know the bank tries to keep inflation between one and three percent and now we know how they do that.

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The Transmission of Monetary Policy - Whiteboard

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The United States and Canada’s Monetary Policy serve the same purpose, they both control money supply and they both try to stabilize inflation rates. This video talks about monetary policy but relates it back to the United States Federal Government. The only difference between Canada’s Monetary Policy and the United States monetary policy is that unlike Canada the USA has more than one Central Bank, otherwise they are the same.

This video is to give you more understanding of monetary policy but also gives you a chance to learn about the United States Monetary Policy. If the United States of America goes into a recession it is very likely, pretty much guaranteed, that Canada will soon follow, like in the 2007-2009 recession that we will look at later.

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This website talks about the types of markets that describe the general well-being of stocks and investors willingness to invest. The two types of markets are bull market and bear market. The first one, bull market, these markets represent a rising economy and a sound one. Bear Market, this is a market that is receding, the economy is head down wards, one way to tell is declining stock prices.

Monetary policy effects these two types of markets and decides whether we are going to be a bull market or bear market. Going back to when we talked about the two instruments the bank uses, interest rates controls effects the market type. With increase interest rates borrowing and buying become more expensive meaning people would be less like to buy stocks causing a bear market, the opposite is for bull market, declining interest rates cause people to invest more and buy more.

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Almost every day in the investing world, you will hear the terms "bull" and "bear" used to describe market conditions. Because the direction of the market is a major force affecting your portfolio, it's important that you know exactly what the terms signify and how each affects you.

What Are Bear and Bull Markets?

The terms bull and bear market are used to describe how stock markets are doing in general-that is, whether they are appreciating or depreciating in value. At the same time, because the market is determined by investors' attitudes, these terms also denote how investors feel about the market and the ensuing trends.

Simply put, a bull market refers to a market that is on the rise. It is typified by a sustained increase in market share prices. In such times, investors often have faith that the uptrend will continue over the long term. Typically, in this scenario, the country's economy is strong and employment levels are high.

By contrast, a bear market is one that is in decline. Share prices are continuously dropping, resulting in a downward trend that investors believe will continue, which, in turn, perpetuates the downward spiral. During a bear market, the economy will typically slow down and unemployment will rise as companies begin laying off workers.

Key Takeaways

Characteristics of Bull and Bear Markets

Although a bull or bear market condition is marked by the direction of stock prices, there are some accompanying characteristics that investors should be aware of. The following list describes some of these factors.

Supply and Demand for Securities: In a bull market, we see strong demand and weak supply for securities. In other words, many investors are wishing to buy securities while few are willing to sell. As a result, share prices will rise as investors compete to obtain available equity. In a bear market, the opposite is true as more people are looking to sell than buy. The demand is significantly lower than supply and, as a result, share prices drop.

Investor Psychology: Because the market's behavior is impacted and determined by how individuals perceive that behavior, investor psychology and sentiment affect whether the market will rise or fall. Stock market performance and investor psychology are mutually dependent. In a bull market, investors willingly participate in the hope of obtaining a profit. During a bear market, market sentiment is negative as investors are beginning to move their money out of equities and into fixed-income securities, as they wait for a positive move in the stock market. In sum, the decline in stock market prices shakes investor confidence, which causes investors to keep their money out of the market-which, in turn, causes a general price decline as outflow increases.

Change in Economic Activity: Because the businesses whose stocks are trading on the exchanges are participants in the greater economy, the stock market and the economy are strongly linked. A bear market is associated with a weak economy as most businesses are unable to record huge profits because consumers are not spending nearly enough. This decline in profits, of course, directly affects the way the market values stocks. In a bull market, the reverse occurs, as people have more money to spend and are willing to spend it, which, in turn, drives and strengthens the economy.

Gauging Market Changes

The key determinant of whether the market is bull or bear is not just the market's knee-jerk reaction to a particular event, but how it's performing over the long term. Small movements only represent a short-term trend or a market correction. It's a longer time period that will determine whether you see a bull or bear market.

Not all long movements in the market, however, can be characterized as bull or bear. Sometimes a market may go through a period of stagnation as it tries to find direction. In this case, a series of upward and downward movements would actually cancel-out gains and losses resulting in a flat market trend.

What to Do in Each Market

In a bull market, the ideal thing for an investor to do is to take advantage of rising prices by buying stocks early in the trend if possible, and then selling them when they have reached their peak.

During the bull market, any losses should be minor and temporary; an investor can typically actively and confidently invest in more equity with a higher probability of making a return.

In a bear market, however, the chance of losses is greater because prices are continually losing value and the end is often not in sight. Even if you do decide to invest with the hope of an upturn, you are likely to take a loss before any turnaround occurs. Thus, most of the profitability will be found in short selling or safer investments such as fixed-income securities.

An investor may also turn to defensive stocks, whose performances are only minimally affected by changing trends in the market and are therefore stable in both economic gloom and boom cycles. These are industries such as utilities, which are often owned by the government and are necessities that people buy regardless of the economic condition.

The Bottom Line

Both bear and bull markets will have a large influence on your investments, so it's a good idea to take some time to determine what the market is doing when making an investment decision. Remember that over the long term, the stock market has always posted a positive return.

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Almost every day in the investing world, you will hear the terms "bull" and "bear" used to describe market conditions. Because the direction of the market is a major force affecting your portfolio, it's important that you know exactly what the terms signify and how each affects you.

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Who is directly affected by the economy? Who directly effects the economy? The answer is you. Your spending, your saving, and your investment decision affect whether we are in a growing economy, or a falling economy. Businesses you work for or you own effect the economy. If they are booming people want to invest, this lets the company grow and greaten's the return on your investments making more people want to invest and allows the company to grow more.

If you are the one who is affected by the economy and the Banks decisions, you should know how to affect them. This video goes in to more detail about your roll in Monetary Policy.

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In plain language, then Governor Mark Carney and eight Bank staffers describe how this complex institution promotes the economic welfare of all Canadians.

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Website Three: Canada during the Recession

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Website Three: Canada during the Recession

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Though in Canada was not as affected as the United States and Europe we still felt the toll of the recession. The cause of the recession is mostly due to the collapse of the USA housing market. The united states made borrowing easier letting people with low incomes buy houses that they can’t afford, meaning that they were not getting paid back, they created mortgage backed payments and this only made the situation worse, this caused the recession. While Canada still was involved, we were not hit as bad. While the states were losing billions of dollars, Canada was still making money, this could be because Canada did not issue mortgage back securities. If you read the below article it goes into depth and explain the whole situation.

This situation had a huge toll on Canada, United States, and Europe and was an excellent learning experience for the Central Banks and Monetary Policy. Knowing about this helps and gives a real life example of controlling inflation rates

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The global financial crisis that began in 2007 dragged much of the world economy into recession, and Canada was not spared. Although the effects on Canada were milder than on the United States and in Europe, the Canadian recession of 2008-09 was still severe enough to generate sharp declines in output and employment and to require significant responses by Canadian policy-makers.

Origins

While its underlying causes are varied and still subject for debate, it is widely acknowledged that the global financial crisis was triggered by the surge and collapse of United States housing prices during the 2000s.

US Housing Market

The US economy had gone into recession in 2001, and the US Federal Reserve - the country's central banking system - reduced interest rates as a counter-cyclical measure ( see Monetary Policy). Lower interest rates made it easier for households to carry larger amounts of mortgage debt, and so the demand for US housing increased. The resulting increase in prices stimulated residential construction activity, and the resulting increase in employment and output in the housing sector was an important factor in the recovery in the US economy.

A contributing factor behind the surge in housing investment was a massive inflow of foreign investment into the United States, notably from China: by 2006, the US current account deficit reached 6 per cent of GDP ( see Balance of Payments). Much of this foreign capital was subsequently channeled into the US housing sector, offering larger pools of savings for households seeking mortgage financing.

The housing market is well-known for its cycle of booms and busts, and it became apparent in the mid-2000s that US housing prices showed many of the signs characteristic of a "bubble." Asset-price bubbles occur when investors make purchases based on the expectation of being able to sell the asset later at a higher price, and not on the inherent qualities of the asset itself.

US housing prices finally peaked in early 2006. Activity in the housing sector slowed, and the US economy began to undertake a transition of investment and employment to other sectors. This transition was not seamless, however, and the United States fell into recession in December 2007.

Financial Crisis

Initial concerns were focused on how declining housing prices affected household wealth: lower levels of wealth are generally associated with lower levels of spending. On its own, the wealth shock was generally viewed as manageable: estimates for the losses were less than those suffered during the dot-com stock market crash of a few years earlier. But the more fundamental problem proved to be structural weaknesses in the financial systems of the United States and other countries. (Canada was an exception, as noted below.)

One contributor was the deterioration in the mortgage underwriting standard: an increasing share of loans was made to high-risk borrowers. When housing prices eventually fell, these "sub-prime" mortgages were more likely to go into default.

The increased securitization of mortgage assets, and most notably the development of Collateralized Debt Obligations (CDOs), amplified the underlying risk. A CDO gave its owner a claim on the flow of mortgage payments made by households. CDOs that offered higher-priority claims were considered to be safe assets, and traded at a premium. The development of CDO and related instruments provided a further incentive to offer sub-prime loans: purchasers of CDOs had little way of verifying the quality of the underlying mortgages upon which the assets were based.

When US housing prices fell, many homeowners found themselves underwater: their mortgage debts exceeded the value of their homes and went into default. It soon became apparent to financial institutions and other investors that many of the supposedly "safe" mortgage-based assets were worth much less than their book values. Financial market liquidity dried up as institutions became less willing to make loans, out of fear that the counterparties might go bankrupt in the near term. These fears came to a head with the collapse of Lehman Brothers, the fourth-largest US investment bank, in September 2008.

DID YOU KNOW?

Liquidity describes the ease with which an asset can be converted to cash. Liquid assets are easiest to convert to cash and lose little to no value when converted because they are valued by a broad market, such as currencies and commodities. Illiquid assets, such as real estate and collectibles, are harder to convert to cash because the market in which they are sold has fewer buyers. Illiquid assets may have a reduced value when quickly converted to cash.

Transmission to Canada

Oil prices continued to surge during the first months of 2008, and the Canadian economy was at first little affected by the US recession: employment and output continued to expand. But the US financial crisis in the fall of 2008 affected global financial markets, and Canada was not exempt from its effects. The collapse of the prices of oil and other Canadian commodity exports compounded the effects of the financial crisis, and the Canadian economy fell into recession in October 2008 ( see Commodity Trading).

Canadian Policy Responses to the Recession of 2008-09

Stabilization of Financial Markets

The immediate priority of policy-makers in the United States and other countries was dealing with banks and other financial institutions that had suddenly become insolvent. Financial institutions play a key intermediary role in the economy, and governments acted to minimize the disruptions caused by bank failures. Banks that were sufficiently large were considered "too big to fail," and had to be bailed out. Indeed, the fact that banks were aware that they were too big to fail produced a moral hazard problem: the belief in an eventual rescue by governments encouraged large banks to engage in risky behaviour.

Canadian policy-makers were spared this problem. Though all of the "Big Six" chartered banks - National Bank of Canada, Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Toronto-Dominion Bank - were considered "too big to fail," Canada's regulatory regime prevented them from engaging in the sort of risky behavior observed elsewhere ( see Bank Act). In particular, Canada's banks were obliged to maintain lower debt-to-equity ratios than most of their counterparts abroad. Higher debt-to-equity ratios offer the possibility of higher profits rates, but highly leveraged banks are also more vulnerable to negative shocks to the value of their assets. After the 1985 collapse of Northland Bank and Canadian Commercial Bank, Canadian regulations were further tightened ( see Estey Commission). Partly because of this stronger regulatory environment, Canada's banks were not in danger of insolvency in the crisis.

Instead, the immediate priority of Canadian policy-makers was to restore stability and liquidity to financial markets ( see Stock and Bond Markets). While Canadian investors and financial institutions were not as exposed to the sort of losses seen in the United States, Canadian holdings of asset-backed commercial paper dropped sharply in value. (The term commercial paper describes short-term, unsecured loans that companies issue in order to finance their accounts and inventories. They are usually sold at a discount but pay out at full value.) In order to avoid the sort of "fire sale" price collapses observed elsewhere, Canadian authorities persuaded investors to accept and write off short-term losses. In addition, measures such as the Insured Mortgage Purchase Program (IMPP) allowed banks to exchange illiquid mortgage assets for bonds issued by the Canadian Mortgage and Housing Corporation (CMHC). Since CMHC debt is backed by the federal government, these assets were more readily accepted as collateral for short-term lending. This exchange did not affect the government's risk exposure to the mortgage market: only mortgages that were already insured by the government were eligible for the IMPP.

Monetary Policy

The failure of Lehman Brothers made it clear that the scale of the financial crisis would soon affect the real economy. On 8 October 2008, the Bank of Canada - in concert with other leading central banks - reduced its target for the overnight rate from 3 per cent to 2.5 per cent ( see Interest Rates in Canada). This action was followed by a series of rate cuts until the Bank's policy rate was reduced to its lower bound of 0.25 per cent on 21 April 2009. (The Bank allows a 0.25 per cent deviation above or below its target rate, so a target of 0.25 per cent implies a lower bound of 0 per cent; see Bank Rate.)

Since the Bank of Canada could not reduce its policy rate any further, it felt obliged to make use of "unconventional" monetary policy instruments. Other central banks, including those in the United States and United Kingdom, had also reached the lower bound of their policy rates and began to use unconventional monetary policy tools. The reduction of the interest rate to its lower bound in Canada was accompanied with a "conditional commitment" to maintain the Bank's policy rate at its lower bound until the middle of 2010. This was the extent of Canada's experience of unconventional monetary policy instruments; unlike in the US and the UK, the Bank of Canada did not see fit to engage in quantitative easing.

DID YOU KNOW?

The term quantitative easing describes the unconventional monetary policy whereby a central bank buys government securities, or other securities, in order to lower interest rates and increase the money supply.

Fiscal Policy

The Conservative government of Stephen Harper remained in power with an increased minority after the federal election of 14 October 2008. During the campaign, the Conservatives promised to keep the federal budget in balance, and its fiscal update of 27 November outlined measures to restrain spending in order to avoid going into deficit. Subsequent economic and political developments - including an attempt by opposition parties to form a coalition government - forced the Conservatives to back away from this position. The Harper government introduced a budget on 27 January 2009 that included a two-year stimulus program, mainly on infrastructure spending ( see Fiscal Policy).

Auto Sector Bailout

The North American auto sector was troubled and in decline even before 2008, and the recession pushed General Motors (GM) and Chrysler into bankruptcy (Ford was able to withstand the crisis). Chrysler was eventually purchased by the Italian automaker Fiat and was able to continue operations.

GM, on the other hand, had no such saviour, and it was "too big to fail." The risk of a catastrophic collapse of GM's network of suppliers and associated industries forced governments in the United States and Canada to take an equity stake in GM. This injection of capital gave GM time to restructure and continue its operations. The federal government and the government of Ontario sold the last of their GM holdings in 2015.

Factors Contributing to Recovery

The efforts of Canadian policy-makers were not the only - or even the most important - factors driving the eventual recovery from recession. The Canadian dollar had been trading near par with the US dollar in mid-2008, but it depreciated sharply as the crisis deepened. By March 2009, the Canadian dollar had depreciated by more than 20 per cent, to less than US$0.80. This depreciation encouraged Canadian exports ( see Exchange Rates).

A more decisive factor was the continued strength of the Chinese economy during the global financial crisis, which supported a recovery in the price of oil and other resource commodities. Oil prices rebounded from a trough of US$30 per barrel in December 2008 to more than US$60 per barrel in May 2009.

Turning Point and Recovery

The US recession was severe enough to draw comparisons with the Great Depression of the 1930s, but the Canadian recession of 2008-09 was milder than the downturns of 1981-82 and 1990-92. The main Canadian business cycle indicators rebounded in the spring and early summer of 2009 ( see Economic Indicators). Monthly GDP attained its trough that May, and the unemployment rate peaked in June. Monthly GDP recovered its pre-crisis peak in October 2010, and employment losses were absorbed in January 2011. US employment did not recover its pre-crisis peak until May 2014.

Aftermath and Legacy

Recovery was slower in the United States and in Europe, and the sluggish growth of the world economy acted as a drag on Canadian economic growth after 2011. The Bank of Canada and other central banks were obliged to maintain their policy interest rates at low levels, as inflation remained weak. It was not until 2017 - almost 10 years after the United States moved into recession - that Canada and the US began to return to pre-crisis monetary policy stances.

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The global financial crisis that began in 2007 dragged much of the world economy into recession, and Canada was not spared. Although the effects on Canada were milder than on the United States and in Europe, the Canadian recession of 2008-09 was still severe enough to generate sharp declines in output and employment and to require significant responses by Canadian policy-makers.

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As we have learned throughout this post, monetary policy is set in place to help keep inflation low, predictable, and stable. Without this you wouldn’t know how much your money is going to be worth in the future and therefore doesn’t allow you to plan. In this picture we can see that although there are fluctuation in inflation the target of 1-3 percent is a constant.

Not only does this chart show us previous interest rates, and allows us to see that the Bank of Canada does a good job in controlling interest rates, it also allows us to see the predicted inflation rates.

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1) What did you learn about this topic the surprised you most?
Being in finance this is topic that I was already quite familiar with and has been focused on in a lot of my class. However I was still able to learn, one thing that I learned was how much the United States housing market crashed affected Canada so much.
2) Provide a real life example of how this topic is relevant or interesting for you.
Like I said I am in finance so this topic reflects the type of work that I want to do once I graduate. Interest rates, inflation rates, and money supply all directly affect finance.
3) If you could pass on any knowledge to family or friends what would it be?
I think that the most important piece of information to pass on would be how much they affect monetary policy. Knowing that you affect the economy is extremely important.