A new consensus on monetary policy?

Vol. 23 No. 4 (2003)

Oct-Dec / 2003
Published October 1, 2003

How to Cite

Heron, Edwin Le. 2003. “A New Consensus on Monetary Policy?”. Brazilian Journal of Political Economy 23 (4):505-30. https://doi.org/10.1590/0101-31572004-0605.

A new consensus on monetary policy?

Edwin Le Heron
Centre de Recherches et d’Études sur le Canada et le Québec en Sciences Sociales (CRECQSS), Institut d’Études Politiques, Bordeaux, France.
Brazilian Journal of Political Economy, Vol. 23 No. 4 (2003), Oct-Dec / 2003, Pages 505-530


By analyzing the documents issued by the Bank of Canada, an original monetary policy can be seen. The Canadian monetary policy tries to maintain its autonomy, whilst at the same time respecting floating exchange rates. The numerous innovations are the foundation of a New Consensus on monetary policy. Far from the dilemma rule versus discretion of the former Monetarist and Keynesian methods, a new dilemma will be the focus: that of credibility versus confidence. Here, the anticipations of the economic agents, the behavior of financial markets and the price of assets play a dominating role. Based on the innovative experiment of the Bank of Canada during the 1990s, the characteristics of the New Consensus will be explained. Far from making independent central banks some high-powered institutions, it shows them instead to be “statues with feet of clay”.

JEL Classification: E50; E52; E58; N42.

Keywords: Central banking monetary policy inflation targeting Bank of Canada credibility versus confidence