MONTRÉAL, QC, May 21, 2013 /CNW/ - Since the eruption of the global
financial crisis, Canada has outperformed other G-7 countries because
of critical foundational advantages, Bank of Canada Governor Mark
Carney said today in a speech in Montréal. The Governor identified "the
cornerstones of Canada's prosperity" as responsible fiscal policy,
sound monetary policy, a resilient financial system and a monetary
union that works.
"The structure of the Canadian economy, the risk sharing across the
federation, labour market flexibility and financial stability together
meant that Canada could adjust quickly to the shock of the global
financial crisis," Governor Carney said. "It also meant that when
Canadian policy-makers responded, they were able to do so swiftly and
Canada's monetary union works because it has the essential elements of
an effective currency union, which helps the economy adjust to shocks.
During the recession, the importance, in particular, of interprovincial
trade as an adjustment mechanism was clear. For example, the increased
demand from other provinces for Quebec's goods and services
significantly offset the loss of international exports.
Labour market flexibility is also an important part of the adjustment
process. By international standards, the Canadian labour market is
highly flexible, although there is still room for improvement. By some
estimates, the Canadian labour market is almost four times as flexible
as the European labour market. "Canadians are going where the jobs
are," Governor Carney said.
Canada's sound financial system is a further advantage. It helps to
"ensure that changes in central bank policy are transmitted effectively
to all areas of a monetary union to support growth and employment," the
These factors are self-reinforcing, said the Governor.
"Our monetary union—with its resilient, national financial system at its
core—gives monetary and fiscal policy traction," Governor Carney said.
"A strong fiscal position means that Canadian governments have had the
flexibility to respond as needed. Our principles-based macroeconomic
policy frameworks help ensure that extraordinary actions do not give
rise to extraordinary fears. And the discipline they instil means that
stimulus will be withdrawn appropriately as threats diminish."
In concluding, the Governor said: "All of this has meant that unlike the
rest of the G-7, Canada does not need to repair. To keep Canada
working, we need to build."
SOURCE: Bank of Canada
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