Why Did the Bank of Canada Emerge in 1935?

Abstract

Three possible explanations for the emergence of the Canadian central bank in 1935 are examined: that it reflected the need of competitive banking systems for a lender of last resort, that it was necessary to anchor the unregulated Canadian monetary system after abandonment of the gold standard in 1929, and that it was a response to political rather than purely economic pressures. Evidence from a variety of sources (contemporary statements to a Royal Commission, correspondence of chartered bankers, newspaper reports, academic writings, and estimation of time series econometric models) rejects the first two hypotheses and supports the third.