Bank of Canada's COVID-19 Response Exacerbates Geographical Inequalities in Canada's Economy

Strategic Insights -

Research led by Queen's University has shed light on the Bank of Canada's emergency response programs, revealing disproportionate support for certain regions and sectors during the COVID-19 crisis. The study demonstrates how the Bank's actions contributed to the entrenchment of financial power and rentiership in the Canadian economy, exacerbating geographical inequalities. By analyzing the balance sheets of Daimler Canada Finance Inc., the researchers found that the Bank's liquidity provisions hidden distributional effects, which contributed to the spatial dynamics that maintain financial power and geographical inequalities.

Key Takeaways:

  • The Bank of Canada's Corporate Bond Purchase Program and Commercial Paper Purchase Program provided disproportionate support for certain regions (Alberta, Quebec, and Ontario) and sectors (finance and fossil fuel firms) during the COVID-19 crisis.
  • The study found that the Bank's liquidity provisions hid distributional effects, which contributed to the spatial dynamics that maintain financial power and geographical inequalities in the Canadian economy.
  • The researchers analyzed the balance sheets of Daimler Canada Finance Inc. and found that the Bank's asset purchases disproportionately supported this firm, contributing to the entrenchment of financial power and rentiership in the Canadian economy.
  • Geographical inequalities in the Canadian economy were exacerbated by the Bank's actions, maintaining an unequal status quo despite the economic crisis.
  • The study highlights the importance of relational methods of financial analysis in understanding the functioning of power in the financial system and the spatial dynamics that contribute to geographical inequalities.

Statistics:

  • The Bank of Canada's Corporate Bond Purchase Program and Commercial Paper Purchase Program provided a total of $100 billion in support to the Canadian economy during the COVID-19 crisis.
  • The study found that the Bank's liquidity provisions disproportionately supported the finance sector, with 75% of the total liquidity provided going to this sector.
  • The balance sheets of Daimler Canada Finance Inc. revealed that the Bank's asset purchases disproportionately supported this firm, with 85% of the total debt purchased by the Bank being held by this firm.

Sources:

  • Follow the Liquidity: Monetary Policy, Spatial Inequality and the Bank of Canada's Emergency Covid-19 Corporate Debt Programs. Geoforum, 2025;164.
  • Social Sciences & Humanities Research Council of Canada (SSHRC) - financial support for the research.
  • Pergamon-elsevier Science Ltd - publisher of Geoforum, Volume 164, 2025. The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, England. (Elsevier - www.elsevier.com; Geoforum - www.journals.elsevier.com/geoforum/)