Nicholas Rowe

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Staff Working Papers

A Simple Test of Simple Rules: Can They Improve How Monetary Policy is Implemented with Inflation Targets?

Staff Working Paper 2003-31 Nicholas Rowe, David Tulk
The authors evaluate whether an assortment of simple rules could improve how the Bank of Canada implements its inflation-targeting monetary policy. They focus on measuring the correlation between the deviations of inflation from the target and the lagged deviations of rule recommendations from the actual policy interest rate.

How to Improve Inflation Targeting at the Bank of Canada

Staff Working Paper 2002-23 Nicholas Rowe
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.

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