Mr Carney and his charts

2012 11 26

Since Mark Carney has been appointed as the new governor of the Bank of England, it would be interesting to check some graphs to see how its former employer, the Bank of Canada, did during the crisis under his tenure. The conclusion: not too bad.

Canada’s GDP is growing at a 2.5 percent rate, with a mere 1.7 percent inflation. Unemployment, which overpassed the 8 percent level in 2009, has been already tamed down to near 7 percent.

The country’s GDP suffered a milder contraction three years ago than many developed nations, just 2.5 percentage points. But the root of the success was a reform of the banking sector carried out before the credit crunch befell on us. Canadian banks could not leverage themselves as much as in other countries.

The second chart shows variation rate of money supply. There was a liquidity push in the worst years of the crisis–and it has been maintained at a considerable rate, a 6 percent. The increase in cash circulation and short-term time deposits in banks and 24-hour money market funds does not seem excessive.

2012 11 18

This third graph shows one-day interbank lending interest rates. As is the US, the Bank of Canada’s policy has been to reach the minimum cost possible, although not for the same long period. In December 2010, it was raised to one percent, where it now remains.

2012 11 07a

The Canadian central bank keeps inflation between one percent and three percent.

2012 11 07

The Bank of Canada has mostly followed the Federal Reserve’s exceptional monetary policies. What makes the difference is that a lower debt burden has enabled a faster recovery.

Also, Canada has reigned in its fiscal balance better than the US because its debt has been more under control, which probably is due to a rather moderated loss of fiscal income, and that the public sector has not had to absorb so much of the private sector debt. Some lesson.

About the Author

Miguel Navascués
Miguel Navascués has worked as an economist at the Bank of Spain for 30 years, and focuses on international and monetary economics. He blogs in Spanish at: http://

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