Skip to main content
SpringerLink
Log in

The IMF and Canada: From Floating to Fixed Exchange Rates

  • Chapter
History of the IMF

Part of the book series: Studies in Economic History ((SEH))

  • 1611 Accesses

Abstract

A key element in the 1944 Articles of Agreement of the International Monetary Fund (IMF) was fixed exchange rates. However, while most IMF member countries sought to establish or maintain fixed exchange rates in the 1950s, the Canadian government placed the Canadian dollar under a flexible exchange rate regime. Canada began using a flexible rate in September 1950 and returned to a fixed rate in May 1962.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 39.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 54.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The Articles of Agreement of the IMF, Article VI, Par Value Currencies, Horsefield (1969c), p. 189.

  2. 2.

    Mundell (1969), pp. 476–479. Bordo follows the argument. Bordo (1993), p. 46.

  3. 3.

    de Vries (1969), p. 159. In June 1970, Canada adopted floating rates again within the Bretton Woods fixed exchange rate system. Powell (2005), pp. 71–73; Helleiner (2006), pp. 118–126. The event shows constancy of the Canada’s economic structure.

  4. 4.

    An example is the remark of the Minister for Reconstruction Clarence Howe in June 1950. Plumpre (1977), p. 143.

  5. 5.

    During 1862 to 1879 the United States suspended its currency’s convertibility due to the Civil War and its consequence and the Canadian dollar kept its value more than 1 US dollar. On the other hand, in the other three periods, Canadian dollar’s value fluctuated around 0.9 US dollars. Powell (2005), p. 97.

  6. 6.

    Canada’s foreign reserves surged from US$ 188 million in 1941 to US$1,508 million. Powell (2005), p. 56.

  7. 7.

    Bank of Canada Archives, Louis Rasminsky fonds, LR76–115, Vol. 2, A Method of Combining a Free Exchange Rate with the Present System of Exchange Control in Canada, January 31, 1949.

  8. 8.

    Helleiner (2006), p. 93. The Bank of Canada was established in 1935. Powell (2005), pp. 47–49.

  9. 9.

    Bank of Canada Archives, International Department fonds, 4B-220, Vol. 1, Wallace Goforth, Reaction to the New Canadian “Floating” Rate, October 18, 1950.

  10. 10.

    Helleiner (1994), Chap. 2; Chwieroth (2010), Chaps. 3 and 4. In the Articles of Agreement of the IMF, the Section 3 of the Article VI describes controls on capital movements. Horsefield (1969c), pp. 193–194.

  11. 11.

    Bank of Canada Archives, LR76-522, Vol.1, Louis Rasminsky, Report on Washington Discussions, Re Floating the Canadian Dollar, October. 21, 1950.

  12. 12.

    Bank of Canada Archives, LR76-522, Vol.1, Louis Rasminsky, Report on Washington Discussions, Re Floating the Canadian Dollar, October. 21, 1950.

  13. 13.

    Bank of Canada Archives, International Department fonds, 4B-220, Vol.1, Wallace Goforth, Reaction to the New Canadian “Floating” Rate, October 18, 1950.

  14. 14.

    Bank of Canada Archives, LR76-522, Vol.1, Louis Rasminsky, Report on Washington Discussions, Re Floating the Canadian Dollar, October 21, 1950.

  15. 15.

    Bank of Canada Archives, LR76-269, Rasminsky to Ansiaux, October 17, 1949.

  16. 16.

    Bank of Canada Archives, LR76-269, Rasminsky to Gutt, October 18, 1950.

  17. 17.

    Siklos (2009) empirically clarifies that in the Canadian float from 1951 to 1957 the foreign exchange interventions well contributed to stabilize the Canadian dollar’s volatilities.

  18. 18.

    Bank of Canada Archives, LR76-115, Vol. 2, A Method of Combining a Free Exchange Rate with the Present System of Exchange Control in Canada, January 31, 1949.

  19. 19.

    Bank of Canada Archives, LR76-522, Vol.1, J.E.C., Exchange Policy, March 5, 1951.

  20. 20.

    Bank of Canada Archives, LR76-522, Vol.1, Note on discussion with Coyne, Rasminsky and Turk, March 24, 1953. On the Exchange Fund Account, see Neufeld (1955), pp. 29, 140.

  21. 21.

    Bank of Canada Archives, LR76-284, Louis Rasminsky, Functioning of IMF, April 20, 1956.

  22. 22.

    Bordo et al. (2010) and Siklos (2010) respectively prove by simulations that financial policies after 1957 was too tight.

  23. 23.

    The Articles of Agreement of the IMF, Article I, Purposes (iii). Horsefield (1969c), p. 188.

  24. 24.

    IMF Archives, Canada-1961 Article VIII Consultation, January 30, 1962, p. 20.

  25. 25.

    IMF Archives, Canada-1961 Article VIII Consultation, January 30, 1962, p. 22, 24.

  26. 26.

    IMF Archives, Canada-1961 Article VIII Consultation, January 30, 1962, p. 25.

  27. 27.

    de Vries (1969), pp. 163–164.

  28. 28.

    Bank of Canada Archives, LR76-522, Vol.2, A.F.W. Plumptre, Exchange Rate Policy, August 23, 1961. On the strengthening of the IMF after 1956, see the Chapter 3.

  29. 29.

    Friedman (1953) is a classic case for the Canadian float. A new case is Helleiner (2008). On the other hand, Mundell regarded the Canadian experience as a failure of experiment. Mundell (1961), p. 664. When he wrote the paper, Mundell was an economist at the IMF Special Research Section.

  30. 30.

    On American cases, see Sugawara (2007), p. 158. In 2006, the United States swelled its current account deficits to 6.8 % of its GDP. The United States in the 2000s could run larger deficits compared to its GDP than Canada could run in the 1950s because the former have issued the key currency.

  31. 31.

    The idea of economic growth depending on capital imports and its collapse comes from Takemori (2008), pp. 135–137.

References

  • Bordo, Michael, Tamara Games, and Lawrence Schembri. 2009. Canada and the IMF: Trailblazer or Prodigal Son? Bank of Canada Discussion Paper, 2009–1

    Google Scholar 

  • Bordo, Michael, Ali Dib, and Lawrence Schembri. 2010. Canada’s pioneering experience with a flexible exchange rate in the 1950s: [Hard] lessons learned for monetary policy in a small open economy. International Journal of Central Banking 6(3): 51–99.

    Google Scholar 

  • Chwieroth, Jefferey. 2010. Capital ideas: The IMF and the rise of financial liberalization. Princeton: Princeton University Press.

    Google Scholar 

  • de Vries, Margaret G. 1969. Fluctuating exchange rates. In The international monetary fund 1946–1965: Twenty years of international monetary cooperation, volume II analysis, ed. Horsefield, John Keith. Washington DC: International Monetary Fund.

    Google Scholar 

  • Fleming, Donald. 1985. So very near; the political memoirs of the honourable Donald M. Fleming, volume two, the summit years. Toronto: McClelland and Stewart.

    Google Scholar 

  • Friedman, Milton. 1953. The case for flexible exchange rates. In Essays in positive economics, ed. Milton Friedman. Chicago: University of Chicago Press.

    Google Scholar 

  • Grantstein, J.L. 1986. Canada 1957–1967: The years of uncertainty and innovation. Toronto: McClelland and Stewart.

    Google Scholar 

  • Helleiner, Eric. 1994. State and the reemergence of global finance: From Bretton Woods to the 1990s. Ithaca: Cornell University Press.

    Google Scholar 

  • Helleiner, Eric. 2006. Towards North American monetary union?: The politics and history of Canada’s exchange rate regime. Montreal: McGill-Queen’s University Press.

    Google Scholar 

  • Helleiner, Eric. 2008. Ambiguous aspects of Bretton Woods: Canadian exchange-rate policy in the Marshall system, 1950–1962. In Orderly change: International monetary relations since Bretton Woods, ed. M. Andrews David. Ithaca: Cornell University Press.

    Google Scholar 

  • Horsefield, John Keith ed. 1969a. The international monetary fund 1956–1965: Twenty years of international monetary cooperation, Volume I: Chronicle. Washington D.C.: International Monetary Fund.

    Google Scholar 

  • Horsefield, John Keith ed. 1969b. The international monetary fund 1956–1965: Twenty years of international monetary cooperation, Volume II: Analysis. Washington D.C.: International Monetary Fund.

    Google Scholar 

  • Horsefield, John Keith ed. 1969c. The international monetary fund 1956–1965: Twenty years of international monetary cooperation, Volume III: Documents. Washington D.C.: International Monetary Fund.

    Google Scholar 

  • Leacy, F.H. (ed.). 1983. The historical statistics of Canada, 2nd ed. Ottawa: Statistics Canada.

    Google Scholar 

  • Maddison, Angus. 1995. Monitoring the world economy 1820-1992. Paris: The OECD Development Centre.

    Google Scholar 

  • Muirhead, Bruce. 1999. Against the odds: The public life and times of Louis Rasminsky. Toronto: University of Toronto Press.

    Google Scholar 

  • Mundell, Robert A. 1961. A theory of optimal currency areas. American Economic Review 51(4): 657–665.

    Google Scholar 

  • Mundell, Robert A. 1969. The international monetary fund. Journal of World Trade Law 3: 455–497.

    Google Scholar 

  • Neufeld, E.P. 1955. Bank of Canada operations 1935–54. Toronto: University of Toronto Press.

    Google Scholar 

  • Ohara, Yuko. 1981. Kanada Gendai Shi [A history of the modern Canada]. Tokyo: Yamakawa Syupan Sha.

    Google Scholar 

  • Plumptre, Arthur F. W. 1977. Three decades of decision: Canada and the world monetary system 1944–75. Toronto: McClelland and Stewart.

    Google Scholar 

  • Powell, James. 2005. A history of the Canadian dollar. Ottawa: Bank of Canada.

    Google Scholar 

  • Powell, James. 2009. The Bank of Canada of James Coyne: Challenges, confrontation, and change. Montreal: McGill-Queen’s University Press.

    Google Scholar 

  • Rhomberg, Rudolf R. 1964. A model of the Canadian economy under the fixed and fluctuating exchange rates. Journal of Political Economy 72(1): 1–14.

    Google Scholar 

  • Siklos, Pierre. L. 2009. Not quite as advertised: Canada’s managed float in the 1950s and Bank of Canada intervention. European Review of Economic History 3(3): 413–435.

    Google Scholar 

  • Siklos, Pierre. L. 2010. Rivisiting the Coyne Affairs: A singular event that challenged the course of Canadian monetary history. Canadian Journal of Economics 43(3): 994–1015.

    Google Scholar 

  • Smith, Denis. 1995. Rogue Tory: The life and legend of John G. Diefenbaker. Toronto: MacFarlane, Walker and Ross.

    Google Scholar 

  • Suda, Miyako. 1992. Kanada No Keizokuteki Keijyousyushiakaji: Kako To Genzai [Canada’s persistent current account deficits: Past and present]. In Taigai Fukinkou No Keizaigaku [An economic analysis on external imbalance], ed. Miyako Suda. Nihon Keizai Shinbun Sya. 127–168.

    Google Scholar 

  • Sugawara, Ayumu. 2007. Taigai Kinyu Seisaku: Shihon Ryunyu No Jizoku Kanousei [External economic policy of the United States: An analysis on the sustainability of capital imports]. In G W Bush Seiken No Keizai Seisaku [The economic policy of G.W. Bush: Ideas and realities of an American conservative], ed. Kawane Takuro. Kyoto: Mineruva Shobo. 157–195.

    Google Scholar 

  • Takemori, Shunpei. 2008. Shihonsyugi Wa Kirai Desuka: Soredemo Manei Wa Sekai O Ugokasu [Don’t you like capitalism?: But money drives the world]. Tokyo: Nihon Keizai Shinbun Sya.

    Google Scholar 

  • United Nations. 1953. Yearbook of international trade statistics 1952. New York: The Statistical Office of the United Nations

    Google Scholar 

Download references

Acknowledgments

The author thanks the Bank of Canada for permission to access the Archives. I am also grateful to Mariko Hatase, Masato Masuda, Tomonori Naito, Masanori Sato, Masato Shizume, and Yasuo Takatsuki for their helpful comments to the earlier drafts.

Author information

Authors and Affiliations

  1. Department of Economics, Tohoku University, 27-1 Kawauchi, Aoba-ku, Sendai, 980-0011, Japan

    Ayumu Sugawara

Authors
  1. Ayumu Sugawara
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ayumu Sugawara .

Editor information

Editors and Affiliations

  1. Waseda University School of Commerce, Shinjuku-ku, Tokyo, Japan

    Kazuhiko Yago

  2. Seijo University Faculty of Economics, Setagaya-ku, Tokyo, Japan

    Yoshio Asai

  3. Otsuma Women's University School of Social Information Studies, Tama, Tokyo, Japan

    Masanao Itoh

Rights and permissions

Reprints and permissions

Copyright information

© 2015 Springer Japan

About this chapter

Cite this chapter

Sugawara, A. (2015). The IMF and Canada: From Floating to Fixed Exchange Rates. In: Yago, K., Asai, Y., Itoh, M. (eds) History of the IMF. Studies in Economic History. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55351-9_10

Download citation

Publish with us

Policies and ethics

Search

Navigation