Canadian policy responses to the global financial crisis and economic recession
Download
1 / 38

Canadian Policy Responses to the Global Financial Crisis and Economic Recession - PowerPoint PPT Presentation


  • 111 Views
  • Uploaded on

Canadian Policy Responses to the Global Financial Crisis and Economic Recession. Lawrence Schembri International Department May 7 2009 For presentation at the Canada Day conference, Rimini Centre for Economic Analysis, Rimini, Italy

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' Canadian Policy Responses to the Global Financial Crisis and Economic Recession ' - linus-ware


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Canadian policy responses to the global financial crisis and economic recession

Canadian Policy Responses to the Global Financial Crisis and Economic Recession

Lawrence Schembri

International Department

May 7 2009

For presentation at the Canada Day conference, Rimini Centre for Economic Analysis, Rimini, Italy

The views expressed in this presentation reflect those of the author and not the Bank of Canada


Why is the canadian experience interesting worthy of attention
Why is the Canadian experience interesting & worthy of attention?

  • Canada entered the crisis in much better shape

  • Canada adopted the right policies at the right time.

  • Canada will recover faster, despite being in a not-so-good neighbourhood

    Bottom line:

  • Important lessons can be learned from Canada

  • The crisis will instigate useful reforms to domestic and international policy










Crisis chronology
Crisis Chronology anchored

  • Financial Crisis began: August 2007

  • U.S. Recession began: December 2007

  • Lehman Bros Collapse: September 2008

  • Synchronized Global Recession: 2008Q4 and 2009Q1




Canadian policy responses
Canadian Policy Responses anchored

  • Financial Sector

  • Fiscal Policy

  • Monetary Policy


Financial sector policy
Financial Sector Policy anchored

  • Liquidity provision (Bank of Canada)

  • Bank liability guarantees (Government of Canada) – “Lenders Assurance Facility”

  • Support for credit markets (Government of Canada)

  • NOT NEEDED - Removal of toxic assets / bank capital injections


Liquidity facilities
Liquidity Facilities anchored

  • The Bank of Canada has introduced several new facilities to provide liquidity to capital market participants:

  • Swaps of high quality, but less liquid assets for short-term government bonds

  • Collateralised loans

  • Key innovations: Wider sets of participants and acceptable collateral


Credit market support
Credit Market Support anchored

  • CDN $125B Insured Mortgage Purchase Program

  • Additional CDN $13B for Export Development Canada, Business Development Bank of Canada, and several other Crown corporations to facilitate trade and business credit

  • CDN $12B Canadian Secured Credit Facility, to support vehicle leasing through purchases of Asset Backed Securities


Canadian fiscal stimulus
Canadian Fiscal Stimulus anchored

  • Approximately CDN $40B or 2.5% of GDP

  • 60% will be infrastructure spending

  • 55% will be spend in 2009 and 2010

  • CDN $8.0B in permanent personal and corporate tax cuts

  • Leverage infrastructure/community spending with the provinces to reach CDN $50B


Monetary policy actions
Monetary Policy Actions anchored

  • Aggressive interest rate cuts: 425 basis points in 16 months to a target overnight rate of 0.25%

  • Unconventional policy measures

    • Conditional statement: hold rates at this level until 2010Q2 conditional on inflation outlook

    • Term Purchase and Resale Agreements (6-12 months in duration)

    • Framework for credit and quantitative easing


Aside credit and quantitative easing
Aside: Credit and Quantitative Easing anchored

  • Quantitative easing -- outright purchase of government or private sector assets with central bank reserves

  • Credit easing -- outright purchase of private sector assets with the sale of other central bank assets (sterilized purchases) or in conjunction with quantitative easing and the creation of central bank reserves (unsterilized purchases)


Annex on framework for conducting monetary policy at low interest rates
Annex on “Framework for Conducting Monetary Policy at Low Interest Rates”

Figure 1: Financing and Type of Asset Purchases


Outlook
Outlook Interest Rates”



U s demand composition should be more favourable to canadian exports
U.S. demand composition should be more favourable to Canadian exports

Annualized Quarterly Growth

%



Lessons for domestic policy
Lessons for Domestic Policy Canadian exports

  • Macroprudential oversight of financial system

  • Mitigate procyclicality in banking regulation

  • National securities regulator

  • Monetary policy at low interest rates

  • Monetary policy should not ignore financial stability concerns


Lessons for international policy
Lessons for International Policy Canadian exports

  • Financial Stability Board - Bigger and Tougher

    • Common standards/rules for financial sector

    • College of supervisors of global financial institutions (peer review process)

    • Crisis resolution procedures for ``too big to fail``

  • IMF – More resources and More Candid

    • + US$500B; New instruments: Flexible Credit Line

    • Better external and internal governance

    • Address financial stability; early warning system


Extra slides
Extra Slides Canadian exports





Canadian fiscal stimulus1
Canadian Fiscal Stimulus Canadian exports


ad