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278
result(s)
November 13, 2000
Seminar Summary: Price Stability and the Long-Run Target for Monetary Policy
On 8 and 9 June 2000, the Bank held a seminar to examine some key issues affecting the upcoming decision on Canada's inflation-control target for the period after 2001. The main issues covered at the seminar were the extent of downward nominal-wage rigidity and its implications for employment as well as the relative merits of price-level targeting versus inflation targeting. Another critical question that was discussed was how to balance the evidence on all the relevant issues in order to develop an overall view on the appropriate long-run target. The author gives a brief overview of the seminar followed by detailed summaries of individual papers.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation targets
Inflation and the Tax System in Canada: An Exploratory Partial-Equilibrium Analysis
Staff Working Paper 2000-18
Brian O'Reilly,
Mylène Levac
This paper reports on an exploratory application to Canadian data of an approach pioneered by Martin Feldstein (1997, 1999). Feldstein finds that even at low inflation rates there are costs arising from the distortions introduced by the interaction of inflation with the taxation of income from capital (capital gains, dividends, and interest) in a less-than-perfectly-indexed tax system.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation: costs and benefits
JEL Code(s):
E,
E5,
E6
August 16, 2000
The Changing Face of Central Banking in the 1990s
During the 1990s, central banks in the industrialized countries made important changes in the way they operate. As part of these initiatives, central banks have endeavoured to define a set of best practices, learning from each other in the process. The goal was to improve and adapt the frameworks within which monetary policy is implemented. Clarifying Objectives A clear objective is a necessary starting point for any policy framework. The growing consensus that price stability is the most appropriate objective for monetary policy was perhaps one of the most critical developments of the past decade. Price stability is now universally regarded as the key contribution that monetary policy can make to promote sustainable growth and maximize the level of employment. Central banks also need a clear strategy for achieving their objective. A major development of the past decade was the growing popularity of inflation targets as the numerical focus for monetary policy. Clearly defined inflation targets focus policy on the variable that is directly associated with price stability. The Bank of Canada was one of the first to adopt (in 1991) a set of targets for inflation over a specified time horizon. Accountability Many central banks have acquired greater independence and this, together with the public's desire for more information from key public institutions, has raised the standards for accountability. At the same time, explicit targets provide a clear measure against which to judge the performance of the monetary authorities. Increased accountability also has implications for the overall transparency of the monetary authorities. In sum, central banks have become much more open institutions and are placing greater emphasis on their communications activities. As an example, comprehensive inflation reports have become key communications vehicles for a number of central banks. Many of the changes implemented by central banks stem from the desire to improve the credibility of monetary policy, thus making it easier for monetary authorities to achieve their objectives. Although it is difficult to ascertain the overall effect of the evolving policy framework, it is encouraging that inflation and inflation expectations were at low levels at the end of the 1990s, thus providing a solid base for monetary policy in the future.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Credibility,
Inflation targets,
International topics,
Monetary policy framework
Identifying Policy-makers' Objectives: An Application to the Bank of Canada
Staff Working Paper 2000-11
Nicholas Rowe,
James Yetman
In this paper, we develop a new way to test hypotheses about policy-makers' targets, and we implement that test for Canadian monetary policy.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets
JEL Code(s):
E,
E5,
E52,
E6,
E61
Non-Parametric and Neural Network Models of Inflation Changes
Staff Working Paper 2000-7
Greg Tkacz
Previous studies have shown that interest rate yield spreads contain useful information about future changes in inflation. However, such studies have for the most part focused on linear models, ignoring potential non-linearities between interest rates and inflation.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Inflation and prices
JEL Code(s):
C,
C5,
C51,
E,
E3,
E31
Indicator Models of Core Inflation for Canada
Staff Working Paper 1999-13
Richard Dion
When there is uncertainty about estimates of the margin of unused capacity in the economy, examining a range of inflation indicators may help in assessing the balance of risks regarding the outlook for inflation. This paper tests a wide range of observable variables for their leading-indicator properties with respect to core inflation, including: commodity prices, […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation and prices
JEL Code(s):
E,
E3,
E31,
E37
Uncovering Inflation Expectations and Risk Premiums From Internationally Integrated Financial Markets
Staff Working Paper 1999-6
Ben Fung,
Scott Mitnick,
Eli Remolona
Theory and empirical evidence suggest that the term structure of interest rates reflects risk premiums as well as market expectations about future inflation and real interest rates. We propose an approach to extracting such premiums and expectations by exploiting both the comovements among interest rates across the yield curve and between two countries, Canada and […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Inflation and prices,
Interest rates,
International topics
JEL Code(s):
E,
E4,
E43,
G,
G1,
G12,
G15
Capital Gains and Inflation Taxes in a Life-cycle Model
Staff Working Paper 1999-2
Charles Leung,
Guang-Jia Zhang
Inflation distorts an economy through many channels. This paper highlights the interaction between inflation and capital gains tax and how they distort an economy through the financial market. Several observations motivate this research. First, capital formation or investment is an important channel for economic agents to smooth their consumption over their life cycles. Second, capital […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation: costs and benefits
JEL Code(s):
E,
E5,
E6
Résultats empiriques multi-pays relatifs à l'impact des cibles d'inflation sur la crédibilité de la politique monétaire
Staff Working Paper 1998-23
Pierre St-Amant,
David Tessier
Over the last few years, many countries have adopted inflation targets. The objective of this paper is to report some empirical results that bear on the link between the adoption of inflation targets and the behaviour of the main macroeconomic variables. After a discussion of some recent articles analyzing international experience, some simple statistical tests […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets