THE BANK OF CANADA: A REVIEW OF THE HISTORY AND DEVELOPMENT OF CANADA'S CENTRAL BANK
This research reviews the history and development of the Bank of Canada. The review addresses motivations for creating the central bank, the legislated roles of the Bank of Canada, the significance of the central bank's creation, and the functioning of the Bank of Canada. The review concludes with an assessment of the success of the Bank of Canada in fulfilling its public policy purpose.
Motivations for Creating the Bank of Canada
The Bank of Canada Act of 1934 provided for the creation of the Bank of Canada. The central motivation for the creation of the Bank of Canada, which occurred in 1935, was to mobilize a Canadian economy mired in depression. Although Canada was not the only country mired in economic depression, it was an industrial country without a central bank to support, promote, and facilitate domestic economic development (Crowell, 1995).
The Preamble of the Bank of Canada Act of 1934 expresses motivations for creation of the Bank of Canada, as well as specifying societal roles for the institution. The Preamble states in part:
à it is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada. (Bank of Canada Act of 1934)
Legislated Roles of the Bank of Canada
The Bank of Canada Act specifies that the institution will promote the economic well being of the country. In pursuing this objective, the Bank of Canada exercises responsibilities for job creation and economic growth (Krehm, 1993). The primary legislative mandate of...