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This article summarizes the proceedings of an international research conference hosted by the Bank of Canada in November 2000. The conference marked the fiftieth anniversary of Canada's adoption of a flexible exchange rate, and its title recognizes the seminal contribution of Professor Milton Friedman's article "The Case for Flexible Exchange Rates." His keynote address to the conference is also summarized in the article. The conference papers re-examine many of the arguments raised by Friedman using recent developments in economic theory and econometric techniques. They investigate the experience of a wide range of industrialized and emerging-market economies. The main findings are that a strong case can be made for flexible exchange rates in economies that are large commodity exporters and that have credible low-inflation monetary policies and relatively well-developed financial systems.

How do deglobalization and rising trade costs affect monetary policy? A two-country, multi-sector model of Canada and the United States shows that bilateral trade-cost shocks generate a manageable inflation–output trade-off under the existing framework — but larger or more persistent shocks would make look-through policies costlier and riskier.

The Bank projects that Canadian economic growth will slow to 1.7 per cent this year before rebounding to 2.1 per cent in 2020.

Inflation in Canada and around the world has been coming down. The Bank projects that inflation will stay around 3% for the next year, returning to the 2% target by the middle of 2025.

While monetary stability through low inflation is crucial to good economic performance, our economy cannot function properly unless it is also supported by an efficient and stable financial system. And as the world economy becomes increasingly interconnected, sound macroeconomic policies and sound financial systems across all countries are even more essential.

We provide empirical evidence on the impact of oil supply shocks on global aggregates. To do this, we first extract structural oil supply shocks from a standard oil-price determination model found in the literature.

Governor Tiff Macklem discusses how inflation targeting became a leading strategy for maintaining price stability and how the Bank of Canada is ensuring its monetary policy framework is fit for future challenges.

In a speech to the Vancouver Board of Trade, Governor Mark Carney discusses the fundamentals of the Canadian residential real estate market, the international context, and the implications for monetary policy.

The Canadian financial system has fared relatively well through this crisis, thanks to effective regulation and prudent practices that have worked like sandbags to protect our financial system from the storms in today's global economy.

A series of major international financial crises in the 1990s, and the recent introduction of the euro, have renewed interest in alternative exchange rate systems. The choice of exchange rate regime is particularly relevant for emerging-market countries because other countries are perceived either as having no alternative to their current exchange rate arrangement or as highly unlikely to change. This article examines the evolution of exchange rate regimes in emerging markets over the past decade and compares the strengths and weaknesses of the various available systems. These include intermediate regimes, such as the adjustable pegged exchange rate popular throughout much of the post—war period, and the two extreme exchange rate regimes: permanently fixed or freely floating exchange rate regimes. Two recently proposed alternatives are also evaluated: the Managed Floating Plus and Baskets, Bands, and Crawling Pegs. Both try to combine the best elements of the flexible and fixed exchange rate systems, but the Managed Floating Plus is deemed to be the more promising alternative.