The Uses and Abuses of the Euro in the Canadian Currency Debate. Jean Monnet/Robert Schuman Paper Series, Vol. 3 No. 3, August 2003

Bowles, Paul and Croci, Osvaldo and MacLean, Brian. (2003) The Uses and Abuses of the Euro in the Canadian Currency Debate. Jean Monnet/Robert Schuman Paper Series, Vol. 3 No. 3, August 2003. [Working Paper]

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Abstract

(From the introduction). In the late 1990s, some prominent Canadian economists – notably Thomas Courchene, Herbert Grubel, Richard Harris, and Robert Mundell – began arguing that a North American common currency would solve the problems underlying the growing gap between U.S. and Canadian real GDP per capita.1 They succeeded in provoking a lively economic policy debate that occurred in parallel with the launch of the euro. The purpose of this paper is to examine the uses – and abuses – of European parallels by both sides in the economic policy debate that peaked in the 1999-2001 period. The body of the paper begins by providing an understanding of the European case. Hence, the second section outlines our interpretation of the major developments in the birth of the euro. The third section, the core of the paper, examines in detail the use of European parallels in the Canadian currency debate. We start by providing a brief overview of the protagonists in the debate. We then continue by arguing that the euro provided a “temporal spur” for the Canadian discussion but that it was only one among several important factors. We argue further that the proponents of a North American common currency relied very little on the European experience to support their case for the need for a common currency. Where they did use the European experience, however, was in their analysis of the institutional form that a common currency in North America might take. We argue that the opponents of a North American common currency were correct in viewing this as an abuse of the European parallel. In the concluding fourth section, we summarize our findings and argue that the most important parallel between the European and North American forces for a common currency is that both were driven primarily by politics.

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