Jamie has worked in the Financial Stability Department since 2011 supporting the Bank’s work analyzing international financial sector policies. Some of her previous work at the Bank included forecasting the Canadian economy and analysing core inflation measures and monetary policy rules. She holds an MA in economics from the University of British Columbia.
Since the Bank of Canada adopted inflation targeting in 1991, it has focused on a measure of core inflation as a shorter-term guide for monetary policy. When the targets were renewed in 2001, the Bank adopted CPIX as its measure of core inflation because of the advantages it offered. Leflèche and Armour review the experience with CPIX and whether the criteria used to select it in 2001 still favour the measure today. They describe the various measures of core inflation monitored by the Bank and evaluate them on the basis of the volatility of the components, the volatility of the core measures themselves, absence of bias relative to total CPI, predictive power, and certain practical criteria, including timeliness and credibility. They conclude that CPIX still satisfies all the empirical and practical criteria.
: Inflation and prices; Inflation targets; Monetary policy frameworkThe author provides a statistical evaluation of various measures of core inflation for Canada.
: Inflation and pricesIn recent years, there has been a lot of interest in Taylor-type rules. Evidence in the literature suggests that Taylor-type rules are optimal in a number of models and are fairly robust across different models.
: Economic models; Monetary policy framework; Uncertainty and monetary policyFeedback rules are rules aimed at guiding policy-makers as they face the problem of keeping inflation close to a desired path without causing variability elsewhere in the economy. These rules link short-term interest rates, controlled by the central bank, to the rate of inflation and/or its deviation from a target rate.
The authors describe the most popular types of feedback rules and review some simulation results.
: Interest ratesA vector error-correction model (VECM) that forecasts inflation between the current quarter and eight quarters ahead is found to provide significant leading information about inflation. The model focusses on the effects of deviations of M1 from its long-run demand but also includes, among other things, the influence of the exchange rate, a simple measure of the output gap and past prices.
: Economic models; Monetary aggregates; Transmission of monetary policyThe authors examine the Bank of Canada's overnight rate as a measure of monetary policy in vector autoregression (VAR) models. Since the time series of the Bank's current measure of the overnight rate begins only in 1971, the authors splice it to day loan rate observations to obtain a sufficiently long period of data.
: Economic models; Monetary and financial indicators
