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Tiff Macklem confirms aspirations to lead Bank of Canada

Senior deputy governor Tiff Macklem, left, and Bank of Canada Governor Mark Carney and appear at a finance committee hearing.

Sean Kilpatrick/CP

Tiff Macklem has confirmed for the first time in public that he wants to be the next governor of the Bank of Canada, solidifying his status as the front-runner in a competition that is entering its final days.

When current Governor Mark Carney announced in late November that he had accepted an offer from the British government to lead the Bank of England, Mr. Macklem emerged as the immediate favourite to fill the vacancy that Mr. Carney would leave in Ottawa.

Mr. Macklem currently is the No. 2 at Canada's central bank and, as a senior official in the Finance Department, was a key figure in this country's fight against the financial crisis.

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So strong was Mr. Macklem's candidacy that Bay Street was taking it for granted that the job was his if he wants it. On Tuesday, he told the House of Commons finance committee that he did. "Yes, if asked, I will serve," Mr. Macklem said in a response to a question from Peggy Nash, the NDP's finance critic.

Ms. Nash asked Mr. Macklem to talk about what it would be like to follow in Mr. Carney's footsteps, but the heir apparent declined to say more. "There is a process that is ongoing," Mr. Macklem said. "I don't think it would be appropriate for me to start answering interview questions here when there is a separate process."

That process is highly secretive, even for the Conservative government, which typically keeps a tight lid on information.

On the weekend in Washington, Finance Minister Jim Flaherty refused to say if he has completed his interviews of the top candidates, even though previously he had indicated he would like to choose a new governor in April.

Mr. Flaherty is reviewing a short list of candidates provided to him by the Bank of Canada's board of directors, which conducted the initial screening of applicants at the end of March. There's been no official word, or even official leaks, but three names have emerged as leading contenders: Mr. Macklem; Stephen Poloz, president of Export Development Canada (EDC); and Darrell Duffie, a native of New Brunswick who teaches finance at Stanford University in Palo Alto, Calif.

Mr. Flaherty's spokeswoman, Kathleen Perchaluk, said Tuesday that the government had nothing new to say about the search for Mr. Carney's replacement. Bank of Canada spokesman Jeremy Harrison also declined to comment.

Mr. Poloz, a former Bank of Canada economist, has for years been discussed as potential future central bank governor. However, he has refused repeated requests to talk about his candidacy to replace Mr. Carney. EDC spokesman, Phil Taylor, said again Tuesday that Mr. Poloz had no comment on his placement on the short list.

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By contrast, Prof. Duffie is a virtual unknown in his native country. His name was absent from early speculation, and only surfaced publicly earlier this month, when one of 16 Bay Street analysts in a Reuters poll named Prof. Duffie as a possibility to lead the Bank of Canada if Mr. Macklem wasn't chosen. Phone and e-mail messages seeking comment on his Bank of Canada candidacy were not returned.

Prof. Duffie graduated from the University of New Brunswick in Fredericton in 1975 with a degree in engineering. He received a masters in economics at the University of New England in Australia in 1980 and a PhD at Stanford in 1984. He was a pioneer in the use of mathematics to understand financial markets; his early research now forms part of the foundation of a field study popularized by Myron Scholes and Robert Merton, who in 1997 shared a Nobel Prize for their development of a formula for valuing stock options.

"Every introductory course in asset-price theory would quote from his papers," Matheus Grasselli, deputy director of the Fields Institute at the University of Toronto, said of Prof. Duffie.

The Stanford professor's inclusion on the Bank of Canada short list is evidence of how the job of running a central bank has gone beyond the calibration of interest rates to control inflation.

In recent years, Prof. Duffie has devoted his efforts to financial regulation, a priority of central banks in the aftermath of the financial crisis. Just this month, Prof. Duffie wrote about systemically important banks, and he has written extensively on over-the-counter derivatives, another priority of the Group of 20 nations.

"He has the profile for that kind of position," said Prof. Grasselli, who hosted Prof. Duffie at a Fields Institute event in Toronto earlier this month, but said he was unaware that he could be in the running to lead the Bank of Canada. "He has a unique capacity to go to high levels of [theoretical] abstraction, and then get down in the weeds" of how financial markets work, Prof. Grasselli said.

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More


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