Skip to main content Accessibility help
×
Home

Not quite as advertised: Canada's managed float in the 1950s and Bank of Canada intervention

  • PIERRE L. SIKLOS (a1)

Abstract

Canada has perhaps the longest track record of adhering to a floating exchange rate regime, but it may well also have been the first country to adopt a managed float during the 1950s. In spite of criticisms levelled at the Canadian government's decision to float the dollar, the remarkable feature of the behaviour of the exchange rate during the so-called float is the relative stability of the nominal exchange rate, and the small volatility in its movements. This article stresses the impact of foreign exchange intervention in limiting exchange rate appreciations and in moderating exchange rate volatility, using newly found, and heretofore unused, intervention data. Until now, all studies of Canada's experience with the float have relied on official foreign exchange reserves data. A counterfactual experiment also suggests that nominal exchange rate levels, and variability, would have been different had there been no foreign exchange market intervention.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Not quite as advertised: Canada's managed float in the 1950s and Bank of Canada intervention
      Available formats
      ×

      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      Not quite as advertised: Canada's managed float in the 1950s and Bank of Canada intervention
      Available formats
      ×

      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      Not quite as advertised: Canada's managed float in the 1950s and Bank of Canada intervention
      Available formats
      ×

Copyright

References

Hide All
Abbott, D. C. (1950). Letter from minister of finance to Graham Towers. Bank of Canada Archives, LR 76–522, 1946–51, 2 October.
Arndt, S. W. (1968). International short-term capital movements: a distributed lag model of speculation in foreign exchange. Econometrica 36, pp. 5970.
Avison, T. L. (1940). The Canadian foreign exchange control board. Canadian Journal of Economics and Political Science 6, pp. 5060.
Bank of Canada (1959), Annual Report 1958. Ottawa: Bank of Canada.
Binhammer, H. H. (1964). Canada's foreign exchange problems: a review. Kyklos 17, pp. 636–53.
Bordo, M. D., Dib, A. and Schembri, L. (2007). Canada's pioneering experience with a flexible exchange rate in the 1950s: (hard) lessons learned from monetary policy in a small open economy. NBER Working Paper 13605.
Bouey, G. K. and Starrs, C. J. (1963). Interest rate differentials between Canada and the United States. Bank of Canada Archives 1B – 710, vol. 2, 1960–1973.
Calvo, G. A. and Reinhart, C. M. (2002). Fear of floating. Quarterly Journal of Economics 117 (2), pp. 379408.
Cornell, P. M. (1951–5). Exchange rate flexibility in Canada: some underlying factors. Bank of Canada Archives, Louis Rasminsky, LR 76–522 (1952–55).
Coyne, J. E. (1961). Memorandum. Bank of Canada Archives, Coyne Fonds, JEC-94–7, vol. 1.
Coyne, J. E. (1949). A method of combining a free exchange rate with the present system of exchange control in Canada. Bank of Canada Archives, Louis Rasminsky, LR 115–13, 31 January.
Davutyan, N. and Pippenger, J. (1989). Excess returns and official intervention: Canada, 1952–1960. Economic Inquiry 27, pp. 489500.
Eastman, H. C. and Stykolt, S. (1956). Exchange rate stabilization in Canada, 1950–4. Canadian Journal of Economics and Political Science 22, 221–33.
Enders, W. (2004), Applied Econometric Time Series, 2nd edition. New York: John Wiley & Sons.
Fatum, R. and King, M. R. (2005). The effectiveness of official foreign exchange intervention in a small open economy: the case of the Canadian dollar. Bank of Canada working paper 2205–21, July.
Fischer, S. (2001). Exchange rate regimes: is the bipolar view correct? Journal of Economic Perspectives 15 (2), pp. 324.
Friedman, M. C. (1953). The case for flexible exchange rates. In Friedman, M., Essays in Positive Economics. Chicago: University of Chicago Press, pp. 157203.
Gibbons, A. D. (1953). Foreign exchange control in Canada, 1939–51. Canadian Journal of Economics and Political Science 19, pp. 3554.
Helleiner, E. (2006). Towards North American Monetary Union? The Politics and History of Canada's Exchange Rate Regime. Montreal and Kingston: McGill-Queen's University Press.
Ingram, J. C. (1960). The Canadian exchange rate, 1950–57. Southern Economic Journal 26, pp. 207–18.
Johnson, H. G. (1970). Floating exchange rates. Osaka Economic Papers 18 (1–2), pp. 1320.
Krugman, P. R. (1991). Target zones and exchange rate dynamics. Quarterly Journal of Economics 106 (3), pp. 669–82.
Levy-Yeyati, E. and Sturzenegger, F. (2007). Fear of appreciation. Working paper 02/2007, Universidad Torcuato di Tella.
McIvor, R. S. (1958). Canadian Monetary, Banking, and Fiscal Development. Toronto: Macmillan.
McKinnon, R. and Oates, W. (1966), The implications of international economic integration for monetary, fiscal, and exchange rate policy. Princeton Studies in International Finance 16. Princeton University.
McLeod, A. N. (1965). A Critique of the Fluctuating Exchange Rate Policy in Canada. New York University Graduate School of Business Administration, The Bulletin nos. 3435.
Mellish, G. H. and Hawkins, R. G. (1968). The Stability of Flexible Exchange Rates – The Canadian Experience, New York University Graduate School of Business, The Bulletin nos. 5051.
Meltzer, A. H. (1967). Review: a critique of the fluctuating exchange-rate policy in Canada by A. N. McLeod. The Journal of Business 40, pp. 96–7.
Muirhead, B. (1999). Again the Odds: The Public Life and Times of Louis Rasminsky. Toronto: University of Toronto Press.
Mundell, R. (1961). A theory of optimum currency areas. American Economic Review 51, pp. 657–64.
Murray, J., Zelmer, M. and McManus, D. (1997). The effect of intervention on Canadian dollar volatility. In Exchange Rates and Monetary Policy. Proceedings of a Conference held at the Bank of Canada, October. Ottawa: Bank of Canada, pp. 311–61.
Mussa, M. (1986). Normal exchange rate regimes and the behavior of real exchanges: evidence and implications. Carnegie–Rochester Conference Series on Public Policy 25, pp. 117213.
Neufeld, E. P. (1972). The Financial System of Canada: Its Growth and Development. Toronto: Macmillan.
Penner, R. G. (1969). Review: The Stability of Flexible Exchange Rates – the Canadian Experience by G. H. Mellish and R. G. Hawkins. Canadian Journal of Economics 2, pp. 324–5.
Pippenger, J. (1967). The Canadian experience with flexible exchange rates. American Economic Review 57, pp. 535–54.
Pippenger, J. E. and Phillips, L. (1973). Stabilization of the Canadian dollar: 1952–1960. Econometrica 41, pp. 797815.
Plumptre, A. F. W. (1970). Exchange rate policy: experience with Canada's floating rate. Princeton Essays in International Finance 81. Princeton University.
Poole, W. (1967). The stability of the Canadian flexible exchange rate, 1950–1962. Canadian Journal of Economics and Political Science 33, pp. 205–17.
Powell, J. (1999). A history of the Canadian dollar. Available at www.bankofcanada.ca/eu/dollar.book/index.html
Powrie, L. (1964). Short-term capital movements and the flexible Canadian exchange rate, 1953–1961. Canadian Journal of Economics and Political Science 30, pp. 7694.
Rasminsky, L. (1952–5), Statements of minister of finance regarding exchange rate policy. Bank of Canada Archives, LR 76–522-42 to 56.
Rasminsky, L. R. (1946–51). Letter from minister of finance to Graham Towers. Bank of Canada Archives, LR 76–522, 2 October 1950.
Rogers, J. M. and Siklos, P. L. (2003). Foreign exchange market intervention in two small open economies: the Canadian and Australian experience. Journal of International Money and Finance 22, pp. 493–16.
Sarno, L. and Taylor, M. P. (2001). Official intervention in the foreign exchange market: is it effective and, if so, how does it work? Journal of Economic Literature 39 (3), 839–68.
Siklos, P. L. (2008). Revisiting the Coyne affair: a singular event that changed the course of Canadian monetary history. Working paper, Wilfrid Laurier University.
Smith, D. G. and Slater, D. W. (1961). Easier money will increase jobs, say these two Queens professors. Financial Post, 25 February.
Svensson, L. E. O. (1992). An interpretation of recent research on exchange rate target zones. Journal of Economic Perspectives 6 (4), pp. 119–44.
Wonnacott, P. (1960). The Canadian dollar, 1948–1957. Journal of Finance 15, pp. 94–5.
Wonnacott, P. (1965). The Canadian Dollar: 1948–1962. Toronto: University of Toronto Press.
Yeager, L. B. (1976). International Monetary Relations: Theory, History and Policy, 2nd edition. New York: Harper & Row.

Not quite as advertised: Canada's managed float in the 1950s and Bank of Canada intervention

  • PIERRE L. SIKLOS (a1)

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed