In particular, many factors may be correlated with the level of financial development of a country, so we want to make sure that the level of financial development is not simply standing in for something else. The differences in financial development, for example, can arise from historical, political, cultural, and legal reasons.
And by focusing on inflation control, both the Bank of Canada and the Federal Reserve are allowing changes in relative prices to send those clear signals that help the economy adjust to different circumstances. Of course, it is not easy for businesses competing in the global economy to adapt to sharp movements in exchange rates.