But by the time I arrived at the Bank of Canada in 1981, there was growing disenchantment with monetary targeting, as the link with inflation was proving to be unreliable. For practical reasons, the target had to be abandoned.
But as former Governor Gerald Bouey famously put it in 1983: “We did not abandon M1, M1 abandoned us.” The search for a better monetary policy framework continued through the rest of the 1980s, both in central banks and in academia. The questions were very fundamental: What is the optimal monetary policy? What is the best anchor for that policy?