Economic fluctuations in Canada, 1867-1897

This thesis examines short-term fluctuations in interest rates, cotton manufacture, and business cycles in Canada from Confederation to the end of the late nineteenth century 'Great Depression'. Motivated by the business cycle methodology of the National Bureau of Economic Research, the analysis proceeds inductively through comparison of time series to establish relationships between variables.; Several previously unavailable time series are presented, including a monthly series for the Montreal call loan rate and the Montreal/New York exchange rate from 1871 to 1897; a monthly series for Canadian railway traffic receipts from 1864 to 1897; and annual series for prices, costs, output, and investment in Canadian cotton manufacture from 1865 to 1897.; "The Montreal call loan and Montreal/New York exchange rate, 1871-97" addresses the puzzling variation between Montreal and New York call loan rates prior to World War I. Dick and Floyd (1992) argued that investors must have assessed risk differently because arbitrage, given the gold standard, prevented manipulation of the Canadian money supply by banks as suggested by Viner (1924) and Goodhart (1969). Comparison of the Montreal call loan and exchange rate series indicates that exchange risk as a variant of the "interest parity condition" is an explanation, since the excess of the New York over the Montreal call loan rate was never greater than the maximum potential loss on New York currency, measured as the difference between the Montreal/New York exchange premium and the Montreal gold import point.; The Montreal call loan rate and the railway traffic receipt series, respecified imports, exports, money supply, and failure liabilities series, and existing total bank loans, price index, and bank stock index series provide the quantitative indicators and contemporary comments the qualitative evidence to date business cycles in "A Revision of Canadian Business Cycle Turns, 1867 and 1897". These peaks and troughs accord with those of E. J. Chambers (1964) for the most part, even though his estimates are weakened by nested financial and export series. There are some significant differences, though, particularly in the depiction of a weak revival during the 1870s depression and longer recessions in the mid 1890s.; "Canadian Cotton Manufacture and the National Policy Tariff" reconstructs the economic history of Canadian cotton manufacture between 1860 and 1897 to question the accepted view that the National Policy Tariff of 1879 was responsible for the investment explosion of the early 1880s and recessions of the later 1880s. These chapters demonstrate that expansion and investment during this period of import substitution was primarily a function of profits expectations from sales and the impact of fluctuations of the foreign price of raw cotton and cotton cloth on per unit profits independent of the tariff.