Fiscal Policy and Inflation in Canada

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During these challenging times, politicians and authorities of numerous countries around the world are doing their best to improve the economy of their states. As noticed in an article published online in The Epoch Times on June 20, 2022, Canada is not an exception. According to the report, in order to protect the country from the long-lasting consequences of the COVID-19 pandemic and the recently emerged effects of the Russian-Ukraine war, Canadian policy-makers implemented fiscal policies, but their efficacy is questionable.

Before discussing the article, it is essential to recall the definition of fiscal policy. This term refers to the use and adjustments of taxation and government spending in order to affect a state’s economic conditions and address unemployment and inflation. Nevertheless, as mentioned by Chen, precisely inflation is an unforeseen consequence of the implemented fiscal policy. To be more precise, the article’s author quotes Scotiabank that states that the Canadian fiscal policies are indeed the primary cause of inflation (Chen). While it is partly the duty of the country’s government to address the issue, the Bank of Canada is presently solving the problem alone. At the same time, as noticed by Chen, “better coordination of monetary and fiscal policies in Canada could lead to a return of inflation to target with less impact on the private sector.” Finally, government spending should also be cut significantly so that the private sector does not carry the disproportional burden of policy adjustment.

The article published in The Epoch Times demonstrates that fiscal policy can also have its own disadvantages and weaknesses. If implemented uncontrollably, in the wrong way, or during challenging times, this policy can lead to the growing rates of inflation, which will then require more strenuous efforts and steps. Therefore, in order to solve the new issue, the Canadian government now needs to revise its spending and reconsider the effectiveness of the fiscal policy.

Work Cited

Chen, Andrew. “Canada’s Fiscal Policy-Makers Are ‘Doing Nothing of Significance’ to Slow Inflation: Scotiabank.” The Epoch Times, Web.

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