Introduction
Canada is one of the countries that have the strongest economy and appropriate living standards. In spite of the fact that the population of this country continues to grow by means of immigrants’ arrival and natural increase (Banta 164), the Canadian economy is characterized by brilliant infrastructure, educated labour forces, and rich reputation.
The history of the Canadian economy is great indeed: the beginning of 1980s required changes because of the rapid growth of industrial cities and brought the crisis; the end of the 1980s was known as the greatest recovery of the country and readiness to new improvements and challenges. The world economic crisis, that takes place at the beginning of 2009, touches Canada considerably and makes the Canadian government and the Bank of Canada take the obligatory steps in order to overcome unemployment and fight against inflation.
It turns out to be obligatory for the country to cope with economic challenges and be able to provide its population with the necessary living conditions. Over the last two years, the situation with the Canadian economy has undergone considerable changes because of the world economic crisis: the Canadian government and the Bank of Canada have to shape macroeconomic policies in order to change unemployment rates, insure the low level of inflation, meet basic needs of population, and continue reducing poverty.
The role of Canadian government and the Bank of Canada in Canadian economy over the last two years
Nowadays, the Canadian economy makes this country one of the wealthiest nations and provides it with a chance to dominate over the other countries in oil, automobile, and trade industries. Economy in Canada is regarded as mature and diverse at the same time: advanced services, free trade agreements, and availability of natural resources.
The Canadian government and the Bank of Canada present all the necessary financial services in order to call this country as one of those with economic freedoms. They involve “the maintenance of a legal system, protection of persons and property, a sound currency, essential transportation infrastructure, and basic education” (Harris 116).
The government of Canada, in the form of a constitutional monarchy, aims at providing the necessary spending and avoiding bankruptcy, improving GDP rates, and stabilizing monetary policy. Current indicators of the Canadian economy have not been changed considerably during the last two years. Of course, the influence of the world economic crisis is noticeable, but still, Canada takes such positions, which will hardly allow its economy to fall dawn.
For example, in 2007, GDP was about &1,200 trillion (Canada Economy), and today the numbers have been changes with the difference -0,1% (Canadian Economy Online). The rates of unemployment are the only ones, which have been raised considerably, because the world economic crisis made more and more people search for some job in order to earn for living.
In order to improve the situation and help population to survive in this crisis that influences the development of numerous countries, the Canadian government and the Bank of Canada have to represent the strategies, which will encourage people. Over the last two years, the role of the Bank of Canada was to promote economic welfare of the Canadians.
Such general purpose includes the stabilization of inflation by means of money stock, provision of financial stability, and proper provision in order to be able to manage public debt. “The Canadian economy performed well in 2007 with output growth increasing between 0.7 per cent and 0.9 per cent in the first three quarters of last year” (Holland and Khoman 17).
In 2009, the situation changes for better: the Canadian government chooses the necessary directions and the Bank of Canada is eager and ready to support people.
In spite of the fact that many world banks are afraid of opening credits for people with not stable salary, the Bank of Canada tries to do everything possible in order to analyze the situation concerning each client and clear up when it is better to provide a person with credit, what has to be done to improve the financial situation of this client, and if it is necessary to provide this person with reasonable explanations of why it is impossible to give credit.
“The weakness in domestic demand is driven mainly by a slowdown in consumer demand and housing investment, with the number of house starts falling by 187, 500 units in December 2007” (Holland and Khoman 17).
Such predictions were inherent for the Canadian economy in the middle of 2007. In that year, the Canadian government and the Bank of Canada were ready or at least aware about the dangers of the world crisis, however, they still hope “the Canadian economy to experience moderately below trend growth, although anticipated interest rate cuts will partially offset the effects of both the turmoil in credit markets and weaker US demand” (Holland and Khoman 17).
Taking into consideration the plans of the Canadian economy during the last two years, it is possible to predict that their future intentions will be still connected to the desire to keep inflation and unemployment levels as lower as possible. The Bank of Canada finds it very effective to low down the inflation level in order to prove its clients to keep their money within banks.
Macroeconomic policies, used by the Canadian government and the Bank of Canada over the last two years
The essence of macroeconomic policy is to promote growth and sustainability of the economical situation within the country. Over the last two years, the government and the Bank of Canada carry out such macroeconomic policies, which will be able to satisfy the vast majority of citizens’ needs and present proper living conditions, taken into account the world economic crisis of 2009.
The purposes of macroeconomic policies by the government are all about the guarantees that inflation will remain low, fiscal and environmental terms will be improved, and financial markets will be modernized. The problem is that even the properly organized Canadian government may face certain challenges and problems when carrying out macroeconomic policies in the middle of the world economic crisis. Such challenges may happen within monetary policy, fiscal policy, stabilization policy, and debt reduction.
This is why it is crucially important for the Canadian government and banks to shape these policies properly, evaluating its conditions and possible consequences. Only a thorough analysis of the already shaped policies in the Canadian economy will promote further development of the country and financial support that will be helpful for personal growth.
Over the last two years, macroeconomic policies have been shaped on a good level, and certain success has been achieved. One of the most effective policies presented by the Canadian government is monetary policy.
It was obligatory to represent such policy stance that would be bale to keep inflation on the low level because the Canadian economy was closely connected to the US slowdown and the world financial crisis. Credit conditions were not stable, this is why interest rates should be established in accordance with the changes within credit conditions.
The government offered to use regulators in order to evaluate and predict the steps to ensure the financial sector. The situation with the Canadian fiscal sector has been improved during the last ten years: deficits have been turned into surpluses, and public debt has been considerably declined. Stabilizing policy was used to various sectors of the Canadian economy. First of all, employment insurance payments and personal income tax aimed at stabilizing the work of each employer and the development of fiscal policy.
Secondly, slow returning of inflation trends to the target allowed demand to become more relative to potential output. The last two years were considerable for the federal government because it has to underestimate revenue on average. Slowdown in economic activities makes the government to stop spending budget but review it once again from all levels of the government.
The effects of the above-mentioned macroeconomic policies, adopted by the Canadian government and the Bank of Canada, remain to be significant. First of all, many countries are already suffering from the economic crisis that has covered almost each country, this is why the government has to care about its citizens and provide them the opportunity to earn money, to find good job, and to be able to pay taxes.
In spite of the fact that many people have already lost their jobs, the Canadian government tries to focus its attention on improving international relations and helping foreigners to develop their business in the spheres of trade and oil.
International relations maintain Canada’s development, and the government has to do everything possible not to lose this chance to improve the economy and achieve the highest points in the world tables. The Canadian economy over the two past years demonstrate one of the best examples of how to cope with the crisis and encourage people to work harder in order to have good earnings and have a chance to choose appropriate living conditions.
Conclusion
The success of the Canadian government and the Bank of Canada in running the Canadian economy over the last two years is really great. In spite of the fact that the world economic crisis creates panic among the representatives of different countries, the Canadian government tries to take such steps, which will be helpful not only for its citizens but also for the foreigners in order to continue international relations and financial services.
Such macroeconomic policies like monetary or fiscal ones help to establish order and control the activities of different people from different spheres. These monetary and fiscal policies and their clearly defined objectives promote the stabilization of the Canadian economy.
The environment that has been created due to carrying out these policies increases the chances for credits and inflation decrease. The Canadian practices should learn other nations how to cope with the unexpected challenges caused by fast spread of the world economic crisis. The activities of the Canadian government and the Bank of Canada should promote other countries to pick out the same strategies, clear up the targets, and follow them in order to achieve success and stability in the economy.
Works Cited
Banta, David, H. Health Care Technology and Its Assessment in Eight Countries. DIANE Publishing, 2004. Print.
“Canada Economy.” Economy Watch. 2009. Web.
Harris, Mike. Vision for a Canada Strong and Free. Vancouver, British Columbia: The Fraser Institute, 2007. Print.
Holland, Dawn and Khoman, Ehsan. “Interest Rate Cuts and the US Slowdown.” National Institute Economic Review 203 (2008): 15-18.
“Pulse of the Economy.” Canadian Economy Online. (2009). Web.