Revisiting the Coyne Affair: a singular event that changed the course of Canadian monetary history

Abstract The Coyne Affair occurred during the 1959–61 period and led to the resignation of the governor. Eventually major reforms of the Bank of Canada Act were enacted. Archival and empirical evidence is used to assess the performance of monetary policy throughout the 1950s. In doing so, a real‐time data set is constructed for both Canada and the US that permits the estimation of a reaction function. I find that while the case against James Coyne is ‘not proven,’ there was a brief period when monetary policy was excessively tight, and this may well have worsened an already weak economic environment.