Necessary adjustment is delayed, and leads to a more exaggerated cycle in the overall economy. Another important lesson that has been learned relates to the production capacity of the economy.
The Bank of Canada is now more sensitive to the negative supply effects that are associated with large relative price movements and the economic restructuring that follows, adjusting its estimates of potential output appropriately to avoid inadvertently overstimulating the economy. The third and final way that governments can help the economy to cope with commodity cycles is through structural reform.