Governor Tiff Macklem makes the case for greater cooperation to shape a stronger international monetary and financial system.
Moving toward an inclusive, open system
In the past few decades, many advanced economies like Canada’s have embraced an open financial and monetary system—with flexible exchange rates, cross-border free trade and open capital markets.
This type of system is crucial to supporting inclusive and sustainable growth in the long run. And it’s up to participants in the international monetary and financial system to make sure we are striving for this common goal.
This global system—the exchange rate and capital accounts as well as the institutions and rules that govern them—affects everyone and is critical to our shared prosperity.”
The road has been bumpy
In recent years, some economies have focused on managing immediate crises at the expense of making longer-term adjustments that will raise productivity and standards of living.
For instance, to get through short-term challenges, many emerging-market economies have relied on strategies such as controlling capital and intervening in foreign exchange markets.
These policies are important tools for coping with urgent economic crises. But using these tools without an exit strategy works against the long-term global goal of achieving an open system that supports a smooth adjustment to shocks.
The international monetary and financial system could also come under more pressure as advanced economies emerge from the pandemic more quickly than others and begin removing monetary stimulus.
We can do better, together
Canada has been a strong advocate for greater investment in the international monetary and financial system. This means establishing rules and governance that can guide us toward our long‑run goals.
Taking these steps will be even more important as we all face an uncertain recovery from the pandemic. Unequal access to vaccines may threaten progress on achieving inclusive and shared global prosperity. And challenging issues such as climate change and digital currencies are on the horizon that could put more pressure on the system.
Global coordination is the key to pulling countries together for the common purpose of building a system that benefits all economies in the long term.
We need a clear long‑run destination that everyone is committed to and a framework to manage short‑run challenges in a way that doesn’t derail us from the ultimate destination.”