CANADIAN MONETARY-POLICY 1989-1993 - WHAT WERE THE BANK-OF-CANADA TRUE ACTIONS IN THE DETERMINATION OF MONETARY CONDITIONS

During its recent battle against inflation from 1988 to the present, t he Bank of Canada has been accused of all the evils that plagued the C anadian economy: high dollar and interest rates, recession, slow recov ery. The purpose of this paper is to analyse the actions taken by the Bank during the period from 1989 to 1993 in order to characterize prec isely the way monetary policy was conducted during this period. We fin d that, contrary to what analysts have usually stated, monetary policy actions were far from tight in 1989. However, from 1990 on, the Bank took a series of restrictive actions in order to discipline financial markets giving an undue importance to its objective of orderly markets to the detriment of monetary expansion.