Dodge recommends economic medicine
Web Posted - Wed Feb 08 2006
By Shawn Cumberbatch
CANADA'S top banker has prescribed what he believes is some old, but necessary medicine for the Barbados economy.
Saying the economic health of this country and as well as his own health were both vulnerable because of their very open status, Governor of the Bank of Canada, David Dodge, urged the introduction of important policy measures to resolve global imbalances.
Speaking yesterday during an address to the Barbados International Business Association, the central banker said while specific policy measures would vary from country to country, there were common principles that policy makers all over should follow.
He suggested because of its open economic status, Barbados should adopt appropriate fiscal policies, the promotion of well-functioning labour and product markets, the provision of a well-functioning social safety net, policies that allow for an efficient and sound financial system and a monetary policy focused on low, stable, and predictable inflation.
We also need a commitment by all countries to a renewed international monetary order and a willingness to play by the rules of the game, he said
Mr. Dodge conceded his pronouncement did not represent a new prescription for global economic health, but happenings on the international economic landscape warranted urgent action.
According to him, Imbalances are persisting, and if they aren't resolved in an orderly way, we face the threat of great disruption. That is particularly true for countries with very open economies such as Canada and Barbados. An orderly resolution of imbalances is in all of our interests. The Governor said while Canada and Barbados did not have much in common where their climate was concerned, the pair relied on good economic performance globally for good performance domestically.
He noted recently the global economy had been delivering that performance and was expected to record real growth of about four per cent or better through to next year.
It would be nice to think that this solid growth could endure forever. However, we all know that the global economy is subject to a number of risks, and policy-makers in international forums spend a lot of time thinking about how best to handle those risks, he said.
Mr. Dodge said global imbalances were characterised by the large and persistent current account deficit in the United States mirrored by large current account surpluses elsewhere, especially in Asia and in many oil-exporting countries.
Given that Canada and Barbados depend on international trade and global financial stability for economic growth, we both have a major stake in seeing that global imbalances are resolved in an orderly way, the official noted.
The governor had some specific advice where the amount of public debt compared to GDP was concerned, saying fiscal policy dictated a clear need for countries to focus on having a sustainable ratio of public debt to GDP.
This would give confidence to businesses and consumers that the value of their money will not be eroded over time, either by high inflation or by excessive taxation. Where a sustainable public debt-to-GDP ratio is now absent, it should be achieved. Where it is present, it should be maintained, he said.
Web Posted - Wed Feb 08 2006
By Shawn Cumberbatch
CANADA'S top banker has prescribed what he believes is some old, but necessary medicine for the Barbados economy.
Saying the economic health of this country and as well as his own health were both vulnerable because of their very open status, Governor of the Bank of Canada, David Dodge, urged the introduction of important policy measures to resolve global imbalances.
Speaking yesterday during an address to the Barbados International Business Association, the central banker said while specific policy measures would vary from country to country, there were common principles that policy makers all over should follow.
He suggested because of its open economic status, Barbados should adopt appropriate fiscal policies, the promotion of well-functioning labour and product markets, the provision of a well-functioning social safety net, policies that allow for an efficient and sound financial system and a monetary policy focused on low, stable, and predictable inflation.
We also need a commitment by all countries to a renewed international monetary order and a willingness to play by the rules of the game, he said
Mr. Dodge conceded his pronouncement did not represent a new prescription for global economic health, but happenings on the international economic landscape warranted urgent action.
According to him, Imbalances are persisting, and if they aren't resolved in an orderly way, we face the threat of great disruption. That is particularly true for countries with very open economies such as Canada and Barbados. An orderly resolution of imbalances is in all of our interests. The Governor said while Canada and Barbados did not have much in common where their climate was concerned, the pair relied on good economic performance globally for good performance domestically.
He noted recently the global economy had been delivering that performance and was expected to record real growth of about four per cent or better through to next year.
It would be nice to think that this solid growth could endure forever. However, we all know that the global economy is subject to a number of risks, and policy-makers in international forums spend a lot of time thinking about how best to handle those risks, he said.
Mr. Dodge said global imbalances were characterised by the large and persistent current account deficit in the United States mirrored by large current account surpluses elsewhere, especially in Asia and in many oil-exporting countries.
Given that Canada and Barbados depend on international trade and global financial stability for economic growth, we both have a major stake in seeing that global imbalances are resolved in an orderly way, the official noted.
The governor had some specific advice where the amount of public debt compared to GDP was concerned, saying fiscal policy dictated a clear need for countries to focus on having a sustainable ratio of public debt to GDP.
This would give confidence to businesses and consumers that the value of their money will not be eroded over time, either by high inflation or by excessive taxation. Where a sustainable public debt-to-GDP ratio is now absent, it should be achieved. Where it is present, it should be maintained, he said.
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