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370
result(s)
Alternative Optimized Monetary Policy Rules in Multi-Sector Small Open Economies: The Role of Real Rigidities
Staff Working Paper 2010-9
Carlos De Resende,
Ali Dib,
Maral Kichian
Inflation-targeting central banks around the world often state their inflation objectives with regard to the consumer price index (CPI). Yet the literature on optimal monetary policy based on models with nominal rigidities and more than one sector suggests that CPI inflation is not always the best choice from a social welfare perspective.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation and prices,
Inflation targets,
Inflation: costs and benefits,
Monetary policy framework,
Monetary policy implementation
JEL Code(s):
E,
E4,
E5,
E52,
F,
F3,
F4
March 9, 2010
Inflation Expectations and the Conduct of Monetary Policy: A Review of Recent Evidence and Experience
This article explores the role of inflation expectations in the conduct of monetary policy. It reviews the various measures of inflation expectations used by central banks, including surveys and market-based indicators, and considers their advantages and disadvantages. It examines the critical role of inflation expectations in the framework that central banks use to understand, forecast, and control inflation. It also looks at their role as an indicator of central bank credibility. The behaviour of inflation expectations over the past two years is analyzed and policy conclusions are offered.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation targets,
Monetary policy implementation
March 9, 2010
Monetary Policy Rules in an Uncertain Environment
This article examines recent research on the influence of various forms of economic uncertainty on the performance of different classes of monetary policy rules: from simple rules to fully optimal monetary policy under commitment. The authors explain why uncertainty matters in the design of monetary policy rules and provide quantitative examples from the recent literature. They also present results for several policy rules in ToTEM, the Bank of Canada's main model for projection and analysis, including rules that respond to price level, rather than to inflation.
March 9, 2010
An Uncertain Past: Data Revisions and Monetary Policy in Canada
Many important economic variables are subject to revision. This article explains how, when, and why such revisions occur; how revisions to Canadian gross domestic product (GDP) compare with GDP revisions in some other countries; which GDP components are subject to the largest revisions; and how data revisions can affect policy decisions. The author finds that revisions to Canadian GDP tend to be smaller, on average, than those of some other countries, and that among the GDP components, exports and imports are most heavily revised.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Business fluctuations and cycles,
Monetary policy and uncertainty
Price Level Targeting: What Is the Right Price?
Staff Working Paper 2010-8
Malik Shukayev,
Alexander Ueberfeldt
Various papers have suggested that Price-Level targeting is a welfare improving policy relative to Inflation targeting. From a practical standpoint, this raises an important yet unanswered question: What is the optimal price index to target?
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy framework
JEL Code(s):
E,
E3,
E32,
E5,
E52
Real and Nominal Frictions within the Firm: How Lumpy Investment Matters for Price Adjustment
Staff Working Paper 2009-36
Michael K. Johnston
Real rigidities are an important feature of modern sticky price models and are policy-relevant because of their welfare consequences, but cannot be structurally identified from time series. I evaluate the plausibility of capital specificity as a source of real rigidities using a two-dimensional generalized (s,S) model calibrated to micro evidence.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy transmission
JEL Code(s):
E,
E1,
E12,
E2,
E22,
E3,
E31
How Changes in Oil Prices Affect the Macroeconomy
Staff Working Paper 2009-33
Brian DePratto,
Carlos De Resende,
Philipp Maier
We estimate a New Keynesian general-equilibrium open economy model to examine how changes in oil prices affect the macroeconomy. Our model allows oil price changes to be transmitted through temporary demand and supply channels (affecting the output gap), as well as through persistent supply side effects (affecting trend growth).
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Interest rates,
Monetary policy transmission,
Potential output,
Productivity
JEL Code(s):
F,
F4,
F41,
Q,
Q4,
Q43
November 11, 2009
Declining Inflation Persistence in Canada: Causes and Consequences
The persistence of both core and total consumer price index inflation in Canada has declined significantly since the 1980s. In addition to providing up-to-date estimates of inflation persistence, this article examines possible reasons for the decline suggested in the literature. The role played by monetary policy, through its effect on price- and wage-setting behaviour, is distinguished from possible changes to the structure of the economy that are independent of monetary policy. The authors also discuss the implications for monetary policy of low structural persistence in inflation, including the choice of an inflation-targeting regime versus a price-level-targeting regime.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation and prices,
Monetary policy framework
Exchange Rate Pass-through and Monetary Policy: How Strong is the Link?
Staff Working Paper 2009-29
Stephen Murchison
Several authors have presented reduced-form evidence suggesting that the degree of exchange rate pass-through to the consumer price index has declined in Canada since the early 1980s and is currently close to zero.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Monetary policy transmission
JEL Code(s):
E,
E5,
E52,
F,
F3,
F31,
F4,
F41