Canada Hit by Overvalued Dollar Some Economists Say Inflation Is Licked and Central Bank Should Lower Interest Rates, Dollar

By Fred Langan, | The Christian Science Monitor, July 3, 1991 | Go to article overview

Canada Hit by Overvalued Dollar Some Economists Say Inflation Is Licked and Central Bank Should Lower Interest Rates, Dollar


Fred Langan,, The Christian Science Monitor


THE Bank of Canada's high interest rate policy has kept the Canadian dollar overvalued, economists charge. This, they add, is hurting Canadian manufacturing and making the Canadian recession worse than the downturn in the United States.

"It is overvalued by 6 or 7 cents and should be worth 80 or 81 cents" in US money, says George Vasic, chief economist at the Toronto office of DRI/McGraw-Hill, an economic consulting firm.

Canada's high interest rates attract foreign money, which keeps the Canadian dollar strong. Japanese investors, both private and institutional, are large holders of Canadian government bonds, drawn by interest rates of 10 and 11 percent.

But the 87-cent dollar makes Canadian manufactured products more expensive in key foreign markets.

John Crow, the governor of the Bank of Canada, has said repeatedly that his aim is crush inflation, and he uses the value of the Canadian currency to do it.

Last week the central bank beat back a run on the Canadian dollar by intervening in the foreign exchange markets and avoided raising domestic interest rates further. The dollar had dropped almost a cent after allegations of influence peddling involving federal ministers and public officials.

Money market traders and the financial press termed the central bank maneuver a victory. "Crow praised for keeping rates stable" read the headline on the business page of the Montreal Gazette.

But for some economists it was a hollow victory.

"Interest rates are still too high. This would have been a great opportunity to get the Canadian dollar down," says Douglas Peters, senior vice president and chief economist at the Toronto Dominion Bank. "As long as we have interest rates which are 2 to 3 percent higher than those in the United States, the dollar will remain strong and Canadian manufacturers will suffer."

Meanwhile, economist Vasic says Mr. Crow and the Bank of Canada did the right thing. "He's on the right path. He wants to avoid a sharp rather than a gradual decline in the dollar."

The idea behind keeping the dollar high is to keep inflation low. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Canada Hit by Overvalued Dollar Some Economists Say Inflation Is Licked and Central Bank Should Lower Interest Rates, Dollar
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.