Credit and credit aggregates, Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, International financial markets, Lender of last resort, , Monetary policy implementation, Payment clearing and settlement systems
-
-
How to Improve Inflation Targeting at the Bank of Canada
This paper shows that if the Bank of Canada is optimally adjusting its monetary policy instrument in response to inflation indicators to target 2 per cent inflation at a two-year horizon, then deviations of inflation from 2 per cent represent the Bank's forecast errors, and should be uncorrelated with its information set, which includes two-year lagged values of the instrument and the indicators. Positive or negative correlations are evidence of systematic errors in monetary policy.