The Great Canadian Disinflation: The Economics and Politics of Monetary Policy in Canada, 1988-93

Brenda L. Spotton is an assistant professor of economics at York
University.

In this latest C.D. Howe study of Canadian monetary policy, the authors
set out to explain how and why the Bank of Canada maneuvred the Canadian
inflation rate down from five percent in 1988 to just over one percent
in the first nine months of 1993. They also address the issue of
central-bank autonomy, an issue that has recently been resurrected.

The book is written for the nonspecialist and organized in a
straightforward manner. The context is set in the first two of four
sections. The monetary policy debates are reviewed and a summary of the
theory and practice of Canadian monetary policy is given. The third
section describes the relevant economic and policy developments over the
period 1988-93. The work concludes with an assessment of the
disinflation experiment and with recommendations for the future conduct
of monetary policy.

Those familiar with the author’s opinions on monetary matters will
find no surprises in this book. They strongly support the bank’s goal
of price stability and recommend that it be left alone to pursue this
goal, unencumbered by any direct government interference. The costs,
they argue, will be worth it.

There are some who would disagree with the authors’ assessment of
just what those costs have been and will be. Nevertheless, this work
provides the reader with an informative look at the reasoning that lies
behind the various actions and inactions of the bank.