Our monetary policy framework is supported by several critical advantages we have as a nation that enhance its credibility and effectiveness. They include sustainable fiscal policy, which the Canadian government has followed since the mid-1990s.6 Such a policy leaves space to stimulate the economy in the event of an economic downturn, through countercyclical fiscal measures, such as regional transfers.
It also includes a flexible labour market and a high degree of internal economic integration and capital mobility as well as a resilient financial system, which I’ll circle back to later.7 Given this context, let’s turn to the four benefits of our flexible exchange rate. Steering our own course Through its history, Canada has relied on foreign trade and investment for its economic prosperity.