Going Beyond the Inflation-Targeting Mantra: A Dual Mandate

Every five years over the last three decades, the Government of Canada goes through a ritual of renewing the mandate of its central bank. To most Canadians, this renewal process must be somewhat puzzling: why would the government want to mandate an arm’s length public agency of the Canadian federal state to do already what, to some extent, its central bank is broadly mandated to do in the preamble to the 85-year old Bank of Canada Act?

Is this five-year government mandate an add-on, a clarification, an actual legal amendment or a revision of the Bank of Canada Act? And, why is it every five years with the same dreary two per cent inflation commitment now repeated for a quarter century regardless of whether the economy is booming or going through its worst recession, as during the current “mother of all recessions” since the 1930s?

"We must abandon the view that inflation is the only concern of central banks."

Professors Marc Lavoie and Mario Seccareccia, two well-known economists from the University of Ottawa, reject much of the theoretical framework that guides the Bank of Canada's policy-making and argue that monetary policy should pursue more goals than just inflation. In his discussion, Université Laval's Stephen Gordon doubts the feasibilty of such an approach.

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