Lawrence L. Schembri

Former Deputy Governor (2013 – 2022)


Lawrence Schembri served as Deputy Governor from 2013 until his retirement from the Bank of Canada in June 2022. In this capacity, he was one of two deputy governors responsible for overseeing the Bank’s analysis and activities promoting a stable and efficient financial system. From 2016, he supervised the Bank’s analysis of domestic economic developments. As a member of the Bank’s Governing Council, he shared responsibility for decisions related to monetary policy and financial system stability and for setting the Bank’s strategic direction.

Mr. Schembri joined the Bank in 1997 as a visiting Research Advisor in what is now the International Economic Analysis Department. In 2001, he was appointed Senior Research Director in the same department and became its Managing Director in 2005. In 2010 he was appointed Advisor to the Governor, with responsibilities for financial stability analysis and coordinating the Bank’s contribution to the Financial Stability Board.

While at the Bank, Mr. Schembri was an active researcher. His published works focused on exchange rate and monetary theory and policy in open economies, the international monetary system and financial stability. He was also active in university recruiting and sponsored the Governor’s Challenge undergraduate student competition. A champion of efforts to promote economic opportunity and inclusion for Indigenous Peoples, Mr. Schembri was a founding member of the Central Bank Network for Indigenous Inclusion.

Born in Toronto, Ontario, Mr. Schembri received a Bachelor of Commerce degree from the University of Toronto in 1979, an MSc in Economics from the London School of Economics and Political Science in 1980 and a PhD in Economics from the Massachusetts Institute of Technology in 1985. After completing his PhD, Mr. Schembri was an assistant professor and, later, associate professor of economics at Carleton University until 2001.


November 16, 2021

Labour market uncertainties and monetary policy

Remarks (delivered virtually) Lawrence L. Schembri Canadian Association for Business Economics Toronto, Ontario
Deputy Governor Lawrence Schembri talks about changes to the labour market, and how the pandemic affected Canadian workers. He also discusses how the Bank is adapting labour market analysis tools to help guide monetary policy decisions that will support a more inclusive recovery.
March 11, 2021

COVID-19, savings and household spending

Remarks (delivered virtually) Lawrence L. Schembri Restaurants Canada Toronto, Ontario
Deputy Governor Lawrence Schembri talks about the Bank’s latest interest rate announcement and discusses how COVID-19 has affected savings and the outlook household spending.
August 25, 2020

Perceived inflation and reality: understanding the difference

Remarks (delivered virtually) Lawrence L. Schembri Canadian Association for Business Economics Kingston, Ontario
In a virtual address to the Canadian Association for Business Economics, Deputy Governor Lawrence Schembri discusses the difference between how Canadians perceive inflation and the actual measured rate. He explains why that gap may exist and what it could mean for monetary policy and the economy.
June 18, 2020

Living with limits: household behaviour in Canada in the time of COVID-19

Remarks (delivered virtually) Lawrence L. Schembri Greater Saskatoon Chamber of Commerce Saskatoon, Saskatchewan
Deputy Governor Lawrence Schembri explains how the COVID-19 pandemic has affected household spending and economic activity, and discusses what the recovery is expected to look like.
September 5, 2019

Economic Progress Report: Inflation in Canada—Well Behaved and Well Controlled

Remarks Lawrence L. Schembri Halifax Regional Chamber of Commerce Halifax, Nova Scotia
Deputy Governor Lawrence Schembri discusses the Bank’s latest interest rate announcement and the behaviour of inflation in Canada.
May 16, 2018

The (Mostly) Long and Short of Potential Output

Remarks Lawrence L. Schembri Ottawa Economics Association and CFA Society Ottawa Ottawa, Ontario
Deputy Governor Lawrence Schembri discusses the importance of potential output to monetary policy, as well as policy challenges and opportunities in a world of low potential output growth.
February 15, 2018

Anchoring Expectations: Canada’s Approach to Price Stability

Remarks Lawrence L. Schembri Manitoba Association for Business Economists Winnipeg, Manitoba
Deputy Governor Lawrence Schembri examines the success of the Bank’s monetary policy framework and explains the review being undertaken before its renewal in 2021.

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Staff discussion papers

Strengthening Inflation Targeting: Review and Renewal Processes in Canada and Other Advanced Jurisdictions

Staff Discussion Paper 2020-7 Robert Amano, Thomas J. Carter, Lawrence L. Schembri
We summarize the review and renewal process at four central banks (Reserve Bank of New Zealand, Bank of England, Sveriges Riksbank and the US Federal Reserve Bank) and compare them with the process at the Bank of Canada, which has been well-established since 2001.

Credibility, Flexibility and Renewal: The Evolution of Inflation Targeting in Canada

Staff Discussion Paper 2018-18 Thomas J. Carter, Rhys R. Mendes, Lawrence L. Schembri
In 1991, Canada became the second country to adopt an inflation target as a central pillar of its monetary policy framework. The regime has proven much more successful than initially expected, both in achieving price stability and in stabilizing the real economy against a wide range of shocks.

External Stability, Real Exchange Rate Adjustment and the Exchange Rate Regime in Emerging-Market Economies

Staff Discussion Paper 2011-5 Olivier Gervais, Lawrence L. Schembri, Lena Suchanek
In emerging-market economies, real exchange rate adjustment is critical for maintaining a sustainable current account position and thereby for helping to reduce macroeconomic and financial instability.

Strengthening IMF Surveillance: An Assessment of Recent Reforms

Staff Discussion Paper 2009-10 Robert Lavigne, Lawrence L. Schembri
The authors assess the potential impact of recently approved reforms to International Monetary Fund (IMF) surveillance; namely, the "2007 Decision on Bilateral Surveillance Over Members' Policies" and the "Statement of Surveillance Priorities" (SSP). They conclude that these complementary reforms have the potential to create a comprehensive and coherent framework for IMF surveillance. If implemented properly, […]
Content Type(s): Staff research, Staff discussion papers Topic(s): International topics JEL Code(s): F, F3, F33

Canada and the IMF: Trailblazer or Prodigal Son?

Staff Discussion Paper 2009-1 Michael Bordo, Lawrence L. Schembri, Tamara Gomes
Canada played an important role in the postwar establishment of the International Monetary Fund (IMF), yet it was also the first major member to challenge the orthodoxy of the BrettonWoods par value system by abandoning it in 1950 in favour of a floating, market-determined exchange rate.

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Staff working papers

Productivity, the Terms of Trade, and the Real Exchange Rate: The Balassa-Samuelson Hypothesis Revisited

Staff Working Paper 2009-22 Ehsan U. Choudhri, Lawrence L. Schembri
The paper examines how the Balassa-Samuelson hypothesis is affected by a modern variation of the standard model that allows product differentiation (within the traded and nontraded goods sectors) with the number of firms determined exogenously or endogenously.
Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Productivity JEL Code(s): F, F3, F31, F4, F41

Canada's Pioneering Experience with a Flexible Exchange Rate in the 1950s: (Hard) Lessons Learned for Monetary Policy in a Small Open Economy

Staff Working Paper 2007-45 Michael Bordo, Ali Dib, Lawrence L. Schembri
This paper revisits Canada's pioneering experience with floating exchange rate over the period 1950–1962. It examines whether the floating rate was the best option for Canada in the 1950s by developing and estimating a New Keynesian small open economy model of the Canadian economy.
Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Exchange rates JEL Code(s): E, E3, E32, E37, F, F3, F31, F32, N, N1

Multilateral Adjustment and Exchange Rate Dynamics: The Case of Three Commodity Currencies

In this paper, we empirically investigate whether multilateral adjustment to large U.S. external imbalances can help explain movements in the bilateral exchange rates of three commodity currencies – the Australian, Canadian and New Zealand (ACNZ) dollars.

Real Effects of Collapsing Exchange Rate Regimes: An Application to Mexico

Staff Working Paper 1999-10 Patrick Osakwe, Lawrence L. Schembri
This paper examines the impact of a collapsing exchange rate regime on output in an open economy in which shocks to capital flows and exports predominate. A sticky-price rational expectations model is used to compare the variability of output under the collapsing regime to that under alternative fixed and flexible regimes. Output is found to […]
Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates JEL Code(s): F, F3, F31, F4, F41

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Bank publications

Bank of Canada Review articles

November 17, 2016

Reinventing the Role of Central Banks in Financial Stability

Central banks contribute importantly to the promotion of financial stability given their sys-tem-wide macro-financial perspective and existing roles as lender of last resort and overseer of systemic payment systems. Since the global financial crisis, the financial system role of central banks has expanded to place more emphasis on the prevention of financial stress and crises. Central banks work with other responsible authorities to enhance financial system resilience and to assess and mitigate financial vulnerabilities and systemic risk.
November 17, 2011

The International Monetary System: An Assessment and Avenue for Reform

The current international monetary system is in need of reform. This article first provides an assessment of the existing system, highlighting both its strengths and weaknesses. It notes that the system has not facilitated the symmetric and timely adjustment in the real exchange rate necessary to accommodate the integration of China and other emerging-market economies into the global economy. This lack of adjustment contributed to the global financial crisis and recession and, because it is forestalling the required rotation of global demand, is hindering the global recovery. The article then discusses reform of the system that would see all systemically important countries and currency areas adopt market-based and convertible floating exchange rates supported by appropriate monetary, fiscal and financial sector policy frameworks. It also examines the roles of the G-20 countries and major international financial institutions in promoting and facilitating the system’s transition.
March 18, 2008

Canada's Experience with a Flexible Exchange Rate in the 1950s: Valuable Lessons Learned

Schembri studies Canada's post-World War II experience in introducing a floating exchange rate, including its effects on the Canadian economy and its influence on the development of macroeconomic theory. In particular, Canada's flexible exchange rate and high degree of capital mobility with the United States provided an unprecedented experiment for macroeconomic policy. The successes and difficulties encountered by Canadian authorities in managing monetary and fiscal policy under this regime drew the interest of researchers at the International Monetary Fund and elsewhere and had a significant impact on the development of the Mundell-Fleming model, the path-breaking innovation in modern open-economy macroeconomics.
April 22, 2005

Borders, Common Currencies, Trade, and Welfare: What Can We Learn from the Evidence?

Recent evidence indicates that the intensity of economic exchange within and across borders is significantly different: linkages are much tighter within, than among, nation-states. These findings, however, do not necessarily imply that borders and separate national currencies represent significant barriers to trade that should be removed, since the evidence is also consistent with the alternative hypothesis, that domestic exchange is more efficient because domestic producers are better able to satisfy the requirements of local consumers, owing to common tastes and institutions and the existence of local information and social networks. Focusing primarily on trade linkages within and between Canada and the United States, the authors review the evidence on the extent to which national borders lessen the intensity of international economic linkages, primarily trade in goods and services, and the effects on domestic welfare. They also examine the evidence on the impact of common currencies on trade and welfare. They determine that, since the empirical models employed to date in this research cannot distinguish between alternative explanations of the evidence, it is not yet possible to draw firm conclusions for policy-making.
April 20, 2005

Conference Summary: Canada in the Global Economy

The Bank of Canada's 2004 research conference examined the real and financial linkages between the Canadian economy and the economies in the rest of the world. Although Canada has profited enormously from its openness to international trade in goods, services, and financial assets, many of the most significant shocks to the Canadian economy in recent years have come from abroad. For these reasons, understanding the extent and nature of the external linkages, their implications for the Canadian economy, and the process by which the Canadian economy adjusts to external shocks is of critical importance both for monetary policy and for monitoring the financial system. This article describes the purpose of the conference—to deepen economists' understanding of these important issues—and provides highlights of the papers presented in each of the five sessions, as well as summaries of the keynote lecture and the discussion of the policy panel.
November 19, 2002

Purchasing-Power Parity: Definition, Measurement, and Interpretation

This article examines the concept of purchasing-power parity (PPP) and its implications for the equilibrium value of the Canadian exchange rate. PPP has two main applications, as a theory of exchange rate determination and as a means to compare living standards across countries. Concerning exchange rate determination, PPP is mainly useful as a reminder that monetary policy has no long-run impact on the real exchange rate, since the exchange rate can deviate persistently from its PPP value in response to real shocks. To compare living standards across countries, PPP exchange rates constructed by comparing the prices of national consumption baskets are used to translate per capita national incomes into a common currency. These rates are useful because they offset differences in national price levels to obtain comparable measures of purchasing power, but they are not an accurate measure of the equilibrium value of the exchange rate. The authors conclude that the current deviation of the Canadian exchange rate from the PPP rate does not imply that the exchange rate is undervalued, but that this deviation reflects the impact of persistent real factors, in particular, lower commodity prices.
May 18, 2002

Foreign Takeovers and the Canadian Dollar: Evidence and Implications

Since 1995, acquisitions of foreign firms by Canadian residents and acquisitions of Canadian firms by foreign residents have increased. Through most of this period, the dollar has depreciated, but the cumulative net balance of foreign direct investment acquisition flows has remained close to zero. The recent upward trend in bilateral acquisition flows is part of the globalization process as firms consolidate and rationalize their operations, and is not related to the value of the Canadian dollar. Standard models of international asset pricing imply that there should not be a relationship between the Canadian exchange rate and foreign takeovers of Canadian firms because an exchange rate movement does not give foreign buyers a systematic advantage over domestic buyers. Purchases of domestic firms by foreign residents are likely to be welfare-improving. Transactions between foreign and domestic residents are voluntary, and they imply that the foreign buyers expect to obtain higher profits from the firms' assets.
November 15, 2001

Conference Summary: Revisiting the Case for Flexible Exchange Rates

This article summarizes the proceedings of an international research conference hosted by the Bank of Canada in November 2000. The conference marked the fiftieth anniversary of Canada's adoption of a flexible exchange rate, and its title recognizes the seminal contribution of Professor Milton Friedman's article "The Case for Flexible Exchange Rates." His keynote address to the conference is also summarized in the article. The conference papers re-examine many of the arguments raised by Friedman using recent developments in economic theory and econometric techniques. They investigate the experience of a wide range of industrialized and emerging-market economies. The main findings are that a strong case can be made for flexible exchange rates in economies that are large commodity exporters and that have credible low-inflation monetary policies and relatively well-developed financial systems.
December 15, 1999

The Exchange Rate, Productivity, and the Standard of Living

This article examines the recent proposition that the decline in Canada's standard of living relative to that of the United States is causally related to the decline in our exchange rate. The authors explore the main channels through which the exchange rate and the standard of living could be related—productivity and the terms of trade—focusing mainly on productivity. They conclude that the decline in world commodity prices and weak demand for domestic output were affecting both Canada's standard of living and the exchange rate and that the flexible exchange rate regime itself did not play an independent role.
November 13, 1998

Currency crises and fixed exchange rates in the 1990s: A review

Currency crises in the 1990s, especially those in emerging markets, have sharply disrupted economic activity, affecting not only the country experiencing the crisis, but also those with trade, investment, and geographic links. The authors review the theoretical literature and empirical evidence regarding these crises. They conclude that their primary cause is a fixed nominal exchange rate combined with macroeconomic imbalances, such as current account or fiscal deficits, that the market perceives as unsustainable at the prevailing real exchange rate. They also conclude that currency crises can be prevented through the adoption of sound monetary and fiscal policies, effective regulation and supervision of the financial sector, and a more flexible nominal exchange rate.

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The Economy, Plain and Simple

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Journal publications

Refereed journals

  • "Current Account Dynamics, Real Exchange Rate Adjustment and the Exchange Rate Regime in Emerging-Market Economies"
    (with Olivier Gervais and Lena Suchanek), Journal of Development Economics, Vol. 119, March 2016, p. 86-89.
  • "Building an Open, Integrated, and Resilient Global Financial System: The Road to Brisbane and Beyond"
    Canadian Public Policy, 2014, 40(4): p. 408-412.
  • "Housing Finance in Canada: Looking Back to Move Forward"
    National Institute Economic Review, 2014, 230: p. R45-R57.
  • "Productivity, Commodity Prices and the Real Exchange Rate: The Long-Run Behavior of the Canada-US Exchange Rate"
    (with Ehsan Choudhri), International Review of Economics and Finance, 2014, 29: p. 537-551.
  • “Multilateral adjustment, regime switching and real exchange rate dynamics”
    (with Ali Dib, Takashi Kano and Jeannine Bailliu) North American Journal of Economics and Finance, Vol. 27, January 2014, pages 68-87.
  • "Productivity, the Terms of Trade, and the Real Exchange Rate: The Balassa-Samuelson Hypothesis Revisited"
    (with Ehsan Choudhri), Review of International Economics, 2010, 18 (5) p.924-36
  • "Canada's Pioneering Experience with a Flexible Exchange Rate in the 1950s: (Hard) Lessons Learned for Monetary Policy in a Small Open Economy"
    (with Michael Bordo and Ali Dib), International Journal of Central Banking, 2010, 6 (3): p.51-99
  • "Canada and the IMF: Trailblazer or Prodigal Son?"
    (with Michael Bordo and Tamara Gomes), Open Economies Review, 2010, 21(2): p.309-33
  • "Exchange Rate Policy in Canada: Lessons from the Past: Implications for the Future"
    Current Politics and Economics of Europe, 2006, 17 (1): p.99-126 (Reprinted in A. Verdun (ed.) Britain and Canada and their Large Neighbouring Monetary Unions (Nova, 2006) p.77-98)
  • "Revisiting the Case for Flexible Exchange Rates in North America"
    (with John Murray and Pierre St-Amant), North American Journal of Economics and Finance, 2003, 14: p.207-240. (Reprinted in L. Michelis and M. Lovewell (eds) Exchange Rates, Economic Integration and the International Economy (APF Press, 2004), p.77-113).
  • "A Tale of Two Dollars: The Future of Canada's Currency"
    (with Robert Lafrance) Management Internationale, 2003, 8: p.53-64.
  • "Productivity Performance and International Competitiveness: An Old Test Reconsidered"
    (with Ehsan Choudhri) Canadian Journal of Economics, 2002, 35(2): p.341-62.
  • "Living Around the Bloc: Lessons from Canada for Small Countries"
    Journal of Public Policy, 2002, 22(2): p.119-142.
  • "The Real Effects of Collapsing Exchange Rate Regimes: An Application to Mexico,"
    (with Patrick Osakwe), Journal of International Economics, 2002, 57(2): p.299-325.
  • "Trade Liberalization and Sectoral Productivity Growth: Some Evidence for Canada and the United States,"
    (with Richard Brecher and Ehsan Choudhri) Journal of International Economics, 1996, 40: p.299-321.
  • "The Role of Canadian Banks in 19th Century U.S. Banking Crises,"
    (with Jennifer Hawkins) Business History, 1992, 34(3): p.122-52.
  • "The Construction of Establishment-Level Capital Stock Series,"
    (with Eugene Beaulieu), Journal of Economic and Social Measurement, 1990, 16: p.55-70.
  • "Atheoretical and Structural Approaches to Modelling Canadian-American Macroeconomic Interaction,"
    (with David Johnson) Empirical Economics, 1990, 15(4): p.367-82.
  • "Macroeconomic Stability and Policy Rules in a two sector model of an open economy,"
    Canadian Journal of Economics, 1988, 21(1): p.87-96.



  • “Credibility, Flexibility and Renewal: The Evolution of Inflation Targeting in Canada” (with T. Carter and R. Mendes) in J. Simon and M. Sutton (eds.) Central Bank Frameworks: Evolution or Revolution? Reserve Bank of Australia conference proceedings.*
  • A discussion of “Is There Macroprudential Policy Without International Cooperation?” by S. Cecchetti and P. Tucker (with F. Ghironi) in the proceeding of the Federal Reserve Bank of San Francisco Asia Economic Policy Conference, Challenges in a Diverging Global Economy. 2018: 115-120.
  • "The Future of the IMS: The New ‘Holy Trinity’ of External, Monetary, and Financial Stability"
    (with Eric Santor) in M Uzan (ed.), Bretton Woods: The Next 70 Years (Reinventing Bretton Woods Committee, 2015) p. 335-342.
  • "A Tale of Two Countries and Two Booms – Canada and the United States in the 1920s and the 2000s: The Roles of Monetary and Financial Stability Policies"
    (with Ehsan Choudhri) in O. Humpage (ed.), Current Federal Reserve Policy Under the Lens of Economic History: Essays to Commemorate the Federal Reserve System's Centennial, (Cambridge, 2015) p. 267-295.
  • "Success Under Pressure: The Bank of Canada and the Global Financial Crisis – Actions and Lessons"
    (with Eric Santor), in R. Medhora and D. Rowlands (eds.), Crisis and Reform: Canada and the International Financial System (Centre for International Governance Innovation, 2014) p.103-118.
  • A discussion of « Terms of Trade Shocks and Fiscal Cycles »
    by Graciela Kaminsky (in R. Fry, C. Jones and C. Kent (eds.) Inflation in an Era of Relative Price Shocks (Reserve Bank of Australia, 2010) p.251-257
  • "The Case for Financial Liberalization"
    (with Eric Santor) in H. Bougrine and M. Seccareccia, (eds.), Introducing Macroeconomic Analysis: Issues, Questions, and Competing Views (Emond Montgomery Publications, 2010) p.271-282
  • "Macroeconomic Stability and Economic Resilience in Small States: The Role of Macroeconomic Policies"
    in L. Briguglio, G. Cordina, N. Farrugia and C. Vigilance (eds.) Small States and the Pillars of Economic Resilience (University of Malta and Commonwealth Secretariat, 2008), p. 37-58.
  • A discussion of « Monetary Policy in East Asia: Common Concerns »
    by Marvin Goodfriend, in Growth, Integration, and Monetary Policy in East Asia, (Bank of Japan, 2007), p. 226-232.
  • "External Adjustment and Debt Sustainability"
    (with Douglas Hostland) in R. Driver, P. Sinclair and C. Thoenissen (eds.), Exchanges Rates, Capital Flows and Policy, (Routledge, 2005) p. 261-300.
  • "Productivity and Trade in North America: A Sectoral Analysis"
    (with Mykyta Vesselovsky) in R. Harris (ed.), North American Linkages: Opportunities and Challenges for Canada, (Industry Canada & University of Calgary Press, 2004), p.89-116.
  • "International Financial Architecture Reform: Just Tinkering Around the Edges"
    (with Malcolm Knight and James Powell) in C. L. Gilbert, J. Rollo and D. Vines (eds.), The IMF and Its Critics: Reforming of the Global Financial Architecture, (Cambridge University Press, 2004), p. 124-157.
  • "Measuring the Barriers to Trade in Services: Literature and Methodologies"
    (with Zhiqi Chen) in J. Curtis and D Ciuriak (eds.) Trade Policy Research 2002, (Department of Foreign Affairs and International Trade Canada, 2002).
  • "Productivity Growth and International Competitiveness: The Experience of Canada and Implications for India,"
    (with Ehsan Choudhri) in Trade, Innovation and Industrial Performance. (Conference Board of Canada, 1997) p. 21-28.
  • "Canadian Exports of Business and Education Services to the Asia-Pacific region,"
    in R. Harris (ed.), The Asia-Pacific Region in the Global Economy: A Canadian Perspective. (University of Calgary Press, 1996) p. 165-196.
  • "Canada and International Trade: Policies for the 1990s,"
    in F. Hampson and C. Maule (eds.), Canada Among Nations: 1990-1991 (Lorimer Press, 1991) p. 41-64.
  • "Exchange Rates and Export Prices: An Industry Approach,"
    in R. Feenstra (ed.), Trade Policy and International Competitiveness (University of Chicago Press, 1989) p. 185-210.
  • A discussion of "Per-Capita Income as a Basis for Trade,"
    by Linda Hunter and James Markusen, in R. Feenstra (ed.), Empirical Methods in International Trade, (MIT Press, 1988) p. 110-113.
  • "Industrial Adjustment in Canada: Causes and Effects,"
    (with Jeffrey Bernstein) in B. Tomlin and M. Molot (eds.), Canada Among Nations: 1986-1987 (Lorimer Press, 1987) p. 87-105.

Publications from working groups