Mark Carney’s BoC Record Under Fire

Mr. Carney’s U.K. honeymoon ended months ago, but the economic wolves are now circling his record in Canada. Once a hero, now he is accused of having driven factories and jobs out of Canada in favour of promoting condo development. The charge, from CIBC World Markets economist Avery Shenfeld, is a bit of a shock. “In effect,” he said, “monetary and exchange-rate policy traded off more condos for fewer factories.”

That’s some charge. As Mr. Shenfeld sees it, the Bank of Canada under Mr. Carney kept interest rates low between 2010 and 2013. During that period the Canadian dollar stayed at parity with the U.S. dollar. The result, said Mr. Shenfeld in a recent commentary, was to stimulate housing development through low interest rates but put a damper on Canadian exports by maintaining a “seriously overvalued” dollar.

Instead of letting the Canadian dollar float, a keystone of Canadian economic policy, Mr. Shenfeld implies the Bank of Canada should have intervened to drive down the dollar. By failing to push the value of the dollar lower, Mr. Carney created an environment in which Canadian manufacturers were discouraged from making long-term investments in plants and were even shuttering them for good.

via Financial Post

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