Okay, sorry.
Evidence of meeting #82 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.
A video is available from Parliament.
Evidence of meeting #82 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.
A video is available from Parliament.
Governor, Bank of Canada
No, I would not exclude it. We have actually studied this carefully. We've been through a phase where many central banks had their interest rates at what we thought was the lowest possible level, but have actually worked with interest rates below zero to good effect. Europe, for example, is turning around nicely now. That is, in part, the product of negative interest rates, whereas there was very little by way of fiscal expansion.
That's to say there is some room to manoeuvre on the monetary side and probably more room to manoeuvre on the fiscal side. Moreover, we're in a state with the economy where fiscal policy has a greater impact because of where interest rates are.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
What do you mean by the fiscal policy? Can you explain that a little more?
Governor, Bank of Canada
That would be programs, such as the infrastructure program, spending federal dollars on investments that promote longer term economic growth, as well as creating employment in the short term.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
What would happen if we're already doing all of that and we had a major disruption in one important sector, which saw a lot more unemployment?
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
If oil prices were going up, could we increase our infrastructure spending? It's a hypothetical situation—
Governor, Bank of Canada
Yes, that's very hypothetical.
Governor, Bank of Canada
The answer would be, especially if the shock is in a particular region or a particular sector, then fiscal policy is much better able to target an area geographically, where more assistance is needed, or to customize the EI program or other things to help a particular sector, whereas monetary policy, as Ms. Wilkins was saying earlier, is generalized across the entire economy.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
Could EI be an important tool if we extended the EI period for certain sectors that are suffering?
Governor, Bank of Canada
We're getting very hypothetical. I'm here to talk about monetary policy.
Governor, Bank of Canada
I'm just saying that fiscal policy would be in the suite of tools that would be more effective given that interest rates are already very low.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
Okay. What would happen if we brought our interest rate lower and the United States rates climbed higher? What would be the impact on the Canadian dollar?
Governor, Bank of Canada
It would depend on what else was going on. As I said before, there are many forces acting at the same time. However, if that were the only thing that changed, most models would predict that the Canadian dollar would depreciate further in the situation you're describing.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
Do you believe that would help out the manufacturing industry in any substantial way, Ms. Wilkins, as we've seen in the past?
Governor, Bank of Canada
As I said before, it may, but it would be sector specific. In many cases, a lower dollar doesn't bring benefits of the sort you have in mind. In other sectors, it does. It would change the distribution of growth through the economy.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
Has the Bank of Canada been looking at the impacts that automation might have in certain job markets and in the Canadian economy more generally?
Governor, Bank of Canada
Not specifically, but perhaps you'd like to say something about it, because you—
Senior Deputy Governor, Bank of Canada
I've been thinking about it a little bit. I plan to speak on it next week. That's why I smiled.
Liberal
