Helleiner's book is the first major book to explore Canada's rather unusual policy of flexible exchange rates over a long historical period. Triggered by the debate in 1999 on whether Canada should move towards joining a North American Monetary Union (NAMU) Helleiner asks what the appeal was of this short-lived enthusiasm, in some Canadian circles, for a North American regional currency (or even a unilateral adoption of the US dollar) in a country that has had such a strong record of exchange rate flexibility. Helleiner argues that NAMU appeared on the agenda at a unique time, namely when the European single currency, the euro, was first being introduced in eleven countries, but it was also a time in which a number of other small open economies in the world were moving to fixed exchange rates. Moreover, Helleiner explains how the specific Canadian context (the Quebec phenomenon) plays a role in considering whether NAMU or dollarization may be of interest. Quebec separatists have not advocated an independent currency in the event of a breakaway from Canada. To the contrary, they were among those advocating the creation of a NAMU in 1999.
Helleiner offers convincing reasons as to why Canada is different from other open economies, in particular, European ones. Besides the matter of a possible Quebec separation (even though it is not likely to be breaking away anytime soon) the Canadian case of monetary policy co-operation or indeed unification with its southern neighbour is different from its European counterpart because the US to date has not seemed interested in pooling sovereignty (i.e., giving Canada a voice over US monetary policy or over its would-be North American Monetary Union). Thus the context matters a great deal when deciding how countries are responding to common challenges, such as increasing capital mobility, the openness of the economy, the degree of integration of the economies with neighbouring countries or the effect of private sector interest groups lobbying for fixed exchange rates.
Helleiner's study offers a rich historical but also profoundly political account of exchange rate policy in Canada from 1850 to the present time. From his carefully researched and lively, well-written book we learn about the various episodes that Canada has gone through and how at each historical crossroads the choice was for flexibility rather than fixing. He reviews not only the historical periods but also some of the more recent times in which a regime shift occurred that included a move to North American Free Trade Area and the NAMU debate at the turn of the century. Helleiner also points to the intricate link between the future of the Canadian federation and the role of its national currency.
With the benefit of hindsight Helleiner has proven right: the Canadian dollar is not likely to be disappearing anytime soon. In fact, with a dollar having recently passed parity with the US dollar and all the recent kafuffle about Canadian versus US dollar, book prices could have given ammunition to those arguing in favour of a fixed exchange rate or closer unification, yet we saw nothing of the sort. It suggests that Helleiner is correct in pointing out how the politics of exchange rate policy is likely to trump any economics of exchange rates. Canada today is less interested in moving closer to the US than it was at the turn of the century. Even if the exchange rate is close to parity, the politics of having independent monetary policy in Canada outweighs any economic benefits of fixing. Helleiner's book offers a deep historical as well as contemporary insight into why this policy was not just made today or yesterday, but is firmly embedded in Canada's exchange rate policy history. Towards North American Monetary Union is very well written, superbly researched and tells a clear story. The book is a must read for anyone with an interest in the political economy of exchange rates in general and the case of Canada in particular.
