In the golden days of the “Great Moderation” this lesson seems to have been lost to a large extent; there was a tendency to separate the role of central banks and of financial market agencies.
The Canadian economy was going through a very challenging period – recovering from the trauma of very high interest rates, falling oil prices and unanchored inflation expectations – and monetary policy and fiscal policy were both trying to achieve very important objectives. Here, and in subsequent sections, we will refrain from evaluating the pros and cons of alternative policy mixes.