To prepare for the 2021 renewal, our researchers studied the effectiveness of the monetary policy framework, assessed alternative frameworks and learned from the experience of other central banks.
Credibility, Flexibility and Renewal: The Evolution of Inflation Targeting in CanadaIn 1991, Canada became the second country to adopt an inflation target as a central pillar of its monetary policy framework. The regime has proven much more successful than initially expected, both in achieving price stability and in stabilizing the real economy against a wide range of shocks.
Could a Higher Inflation Target Enhance Macroeconomic Stability?Recent international experience with the effective lower bound on nominal interest rates has rekindled interest in the benefits of inflation targets above 2 per cent. We evaluate whether an increase in the inflation target to 3 or 4 per cent could improve macroeconomic stability in the Canadian economy.
Redistributive Effects of a Change in the Inflation TargetIn light of the financial crisis and its aftermath, several economists have argued that inflation-targeting central banks should reconsider the level of their inflation targets. While the appropriate level for the inflation target remains an open question, it’s important to note that any transition to a new target would entail certain costs.
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