Wednesday, November 28, 2012

We'll miss that Mark Carney squint


Mirroring Nick Rowe, here are some quick comments on the departure of Mark Carney from the Bank of Canada to the Bank of England.

Canadian monetary policy is set via an ongoing conversation between the Prime Minister, his/her agent the Minister of Finance, and the Governor of the Bank of Canada. This joint conversation happens because unlike Japan, Europe, or the US, the Finance Minister has the legislated power to fire the Governor of the BoC before his/her term is up. The minister must provide a public (and potentially embarrassing) explanation for doing so. As a result both minister and governor are incentivized to cobble policy jointly.

So whatever policy we've had in Canada since 2008, you can be sure that there's a bit of PM Harper and Finance Minister Jim Flaherty mixed in with the Carney. Did we ever really know the man? With Carney leaving but the other two sticking around, will there be much of a difference going forward?

As for the UK, Carney's term at the BoE runs for five years, but as far as I can tell there seems to be no ability to remove him from power before then. Without this leash, Bank of England watchers will be more likely to see an unadulterated version of  Carney than we ever saw here in Canada.

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