The Role of the Bank of Canada and the Government of Canada in Running the Economy - Case Study Example

 Canadian Economy Since a decade, the world has witnessed a new trend of globalization that is influencing most of the sectors, especially business, economics, health, education, etc in different parts of the globe. Such trend has resulted in an urgent need of alterations in policies and creation of innovative strategies that may confront challenges of globalization and ensure development as well (Thiessen, 1999). Besides globalization, economic recession has been the second most crucial challenge, especially in the economic sector that is attempting to destruct every economy that is coming in its way. In specific, Canada has also been one of the sufferers of economic recession and experts have specified that although there have been adverse effects of economic recession, however, Canadian authorities were very effective in overcoming issues and challenges, and thus, were and still are successful in running the Canadian economy in an efficient manner, especially since the past 2-3 years. While the Canadian government received applause from the economic analysts, they had to confront criticism from some experts as well, as they criticized that while running the economic matters of the country, authorities and especially the Bank of Canada have shown ineffectiveness and uselessness. While comparing performance of the Canadian government with G7 states, its graph is going down, and it is imperative that the government with collaboration of the Bank of Canada should take crucial steps to avoid the downfall that will result in adverse impact on different sectors of the country. For this purpose, the paper will try to identify and evaluate the role of the Bank of Canada and the government of Canada in running the economy. In addition, the paper will strive to converse about different economic changes brought in by these two contributors and runners of the Canadian economy. More specifically, economic policies and strategies of the Canadian government for the last two years will be in scrutiny. Due to the wave of globalization, and most importantly, economic recession, economists are suggesting governments and banking sector to introduce policies that may complement global scenario of economic development rather than limiting to only regional economic development of the country. Studies related to the role of Canadian government have indicated that since the past 2-3 years, the government along with collaboration of the Bank of Canada has created their macro-economic policies on the same track, and the Canadian government is still endeavoring to introduce policies that may consider global needs and issues rather than needs of only Canadian citizens. Although it may sound inappropriate, however, on a long-term basis, such policies will enable the country to develop more significantly on the economic scale while handling with the issues on global level. A number of experts have been involved in the comparison of performances of Canadian government with the American government in terms of running economic matters of the country. Findings have indicated that Canadian government has been able to deal with the issue of economic recession in a more efficient manner as compared to the US government. In addition, the banking sector of the Canada has made a major contribution in the last 2-3 years, and has supported the government to overcome adverse effects of the economic recession effectively. Particular to the Canadian banking sector, the Bank of Canada has been an influential figure in controlling private banking sector by implementing effective management strategies that focused primarily on the imposition of inflexible regulations. Such rigidity in terms of supervision of financial sector has allowed the Bank of Canada to avoid the effects of recession that have deteriorated conditions in the USA during the last few years. In addition, the Canadian government has provided an efficient macroeconomic platform to the banking sector that has been beneficial for them to develop productively. Specifically, experts have specified that focus of Canadian government on global resolutions and needs have been very beneficial for the country and its economy, and this is observable in Canada’s leading position in the list of G7 countries globally. Moreover, such approach of the Canadian government has turned it into a blueprint for other countries and economies around the world that are endeavoring to implementing Canadian banking and economic structure in their regions (NRCC, 2009). Besides such attributes of the Canadian economy, Canadian policymakers and economists have shown significant consistency and steadiness in their macroeconomic policies and strategies, especially since past three years that have resulted in effective economic benefits in a continuous manner. Additionally, the pioneering approach of the Bank of Canada in creating economic policies for targeting inflation has provided enormous advantages in terms of a mature and stabilized economy. One of the major benefits of this approach of the Canadian government and the Bank of Canada is its steady inflation rate that has remained under 2% since ten years and has continued to remain consistent during the last two years. Financial sector of the country has been advantageous as well due to a strong regulatory policy of the Bank of Canada. For instance, the Bank of Canada regulates every private bank and stakeholders to inform every statistical figure, alterations, etc to it that has supported the Federal banking experts to control the economy in an organized manner unlike other American and European countries around the globe (NRCC, 2009). In this regard, the Canadian government has been using the federal legislation as its basic tool to govern economic sector of the country. However, although it has been rigid in regulating private stakeholders, however, the Bank of Canada, on the orders of the Canadian government, carry out renovation and rejuvenation steps in its banking and macroeconomic policies, essential due to rapid alterations on the global scenario. Such practice of regular alterations in the regulatory policies has enabled the government to estimate economic developments in a more realistic manner. In addition, such alterations allow the private sector as well to contribute and develop more rapidly and efficiently in the country that is the reason that Canada receives a higher amount of trust from the private investors and stakeholders due to its steady and updated strategies and policies. Another significant quality of the Bank of Canada is its central management system that has resulted in elimination of loopholes that allow private stakeholders in other countries to affect the economy in an adverse manner. In the case of Canadian economy, the Bank of Canada has implemented a CMS (central management system) that brings all the dealers under one platform through this system, so every investment comes and goes through this system. Due to this central practice, the Bank of Canada can monitor the performance of private banking sector in a more effective manner that is not possible in other countries. In particular, ‘Office of the Superintendent of Financial Institutions’ (OSFI) is the primary regulating and monitoring body of the Bank of Canada, responsible for managing financial organizations in Canada. In this regard, on one hand, Canadian government encourages private banking stakeholders in the country, and on the other hand, it has a central regulatory formation that enables the Bank of Canada to direct private sector towards a profitable path (Rajasekaran, pp. 1-11, 2009). Ambitious approach of the Bank of Canada, as well as the government of Canada is another significant factor that has enabled both parties to run the economy in an efficient manner. For instance, OSFI has a target of seven percent of Tier 1 capital; however, research has indicated that Base II has only given four percent of target. Such higher target setting of the Canadian policymakers has resulted in competent outcomes, and benefits are visible in higher performance of the Canadian economy on regional, as well as global level (NRCC, 2009). In addition to ambitious targets and consistency in its economic policies, the government of Canada has always encouraged consistency in amount of assets. Moreover, economists have specified that the Bank of Canada encourage sound capital, essential for acquiring and maintaining assets that has been fruitful for its economy, especially in the last two years when the effects of recessions are on its peak and the government has been overcoming its effects due to this consistency. On the other hand, analysis of the material regarding global economies has indicated that other American and European countries follow the structure of creation and distribution, whereas, the Canada has been following the consistent assets and sound capital model, and outcomes are clear (NRCC, 2009). A significant outcome of such consistency in the macroeconomic policies of the Canadian government is ranking of Canadian banking sectors on top of the global list that shows the level of success of efforts made by Canadian economists and policymakers. Further scrutiny of macroeconomic policies of the Canadian government has indicated that the governmental authorizes have always encouraged and appreciated open, as well as free economic markets on the national level. However, in order to control and avoid loopholes and drawbacks, the government has ruled out such structures of the economy from social sector of the country, such as education, health, social welfare, etc. In this regard, in social sectors, the Canadian government has once again shown rigid behavior that has been beneficial for Canadian citizens, and thus, public has appreciated and welcomed such policies in the country (NRCC, 2009). Thus, on one hand, encouraged of open and free market economies have motivated foreign and private investors to trust the economic policies. In addition, a free and open market economy has increased the rate of employment on national level. On the other hand, the Canadian government has not compromised with social structure and rights of the Canadian public, an indication of good governance attributes of the Canadian government and efficient management qualities of the Bank of Canada. It is very important that economists and policymakers should be optimistic in their perspectives and this is noticeable in Canadian experts, another factor of successful economic structure of Canada. In mid-2009, a publication of the National Post (Tait, pp. FP.4, 2009) indicated through a survey that more than eighty percent of Canadian consumers were satisfied with macroeconomic policies of the Canadian government, as well as the Bank of Canada that is the highest rate of consumer trust since 2005. This indicates the efficacy and aptness of the government of Canada in running Canadian economy in a well-organized manner. During the same period, another study (Tait, pp. FP.4, 2009) surveyed Canadian, as well as foreign private investors regarding their viewpoint about future of the Canadian economy. Findings of this survey indicated that more than twenty percent of the investors were confident and expecting optimistic status of the Canadian economy. This percent increased from 20% to 29% from June 2009 to August 2009 that indicates significant performance of Canadian economists. In addition, only 15% of the survey participants were not hopeful for positive performance of Canadian economy in the year 2010 that is very less, and thus, the government of Canada has been able to establish a closer relationship with private stakeholders along with collaboration of the Bank of Canada. Finally, another focus of the government of Canada has been the improvement of regulatory formation since 2-3 years, and most importantly, the Canadian government has been putting efforts with collaboration of G20 countries that will be very beneficial for the economy in coming years ahead. In brief, the Canadian government is playing a crucial and positive role in running the economy successfully with the help of private sectors as well. Moreover, the government has been successful due to another major factor of transparency. Transparency is a critical factor in any economic matter and encouragement of transparency has helped the government in using its resources in an organized manner, allowing the government to provide enough funds to the International Monetary Fund as well. Furthermore, the Bank of Canada has been successful in bringing lucidity and the notion of accountability in private banking sector of Canada according to various economic reports (HRSD Canada, 2009) that will be significant in rapid economic development of the country in future. In conclusion, the paper has analyzed some of the significant aspects of the Canadian economy and attempted to evaluate role of the government of Canada, as well as the Bank of Canada in running economy in a successful manner. It is a hope that this information will be valuable for students, teachers, and professionals in better understanding of the topic. References HRSD Canada. (2009). “Government of Canada helping Canadians prepare for the Economy of the future.” Canadian Business Online. Retrieved on October 26, 2009: http://www.canadianbusiness.com/markets/marketwire/article.jsp?content=20091024_111503_0_ccn_ccn NRCC. (2009). National Research Council Canada. Retrieved on October 26, 2009: http://www.nrc-cnrc.gc.ca/eng/index.html Rajasekaran, Vinod. (2009). “Rebooting the Economy: What is the role of government in the transforming economy?” Public Policy Forum. Retrieved on October 26, 2009: http://www.ppforum.com/publications/rebooting-economy-what-role-government-transforming-economy Tait, Carrie. (2009). “Canadians show their best outlook of economy in two years.” National Post. Issue of September 05, 2009, pp. FP. 4. Thiessen, Gordon. (1999). “Speech on the Canadian economy.” Bank of Canada. Retrieved on October 26, 2009: http://www.bankofcanada.ca/en/speeches/1997/sp97-5.html Read More