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369
result(s)
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.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets,
Monetary and financial indicators,
Monetary policy implementation
JEL Code(s):
E,
E5
August 21, 2002
Monetary Policy and Uncertainty
Central banks must cope with considerable uncertainty about what will happen in the economy when formulating monetary policy. This article describes the different types of uncertainty that arise and looks at examples of uncertainty that the Bank has recently encountered. It then reviews the strategies employed by the Bank to deal with this problem. The other articles in this special issue focus on three of these major strategies.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Monetary policy and uncertainty,
Monetary policy framework
August 20, 2002
Information and Analysis for Monetary Policy: Coming to a Decision
This article outlines one of the Bank's key approaches to dealing with the uncertainty that surrounds decisions on monetary policy: the consideration of a wide range of information from a variety of sources. More specifically, it describes the information and analysis that the monetary policy decision-makers—the Governing Council of the Bank of Canada—receive in the two or three weeks leading up to a decision on the setting of the policy rate—the target overnight interest rate. The article also describes how the Governing Council reaches this decision.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Monetary and financial indicators,
Monetary policy framework,
Monetary policy implementation
August 18, 2002
The Role of Simple Rules in the Conduct of Canadian Monetary Policy
The third strategy employed by the Bank when dealing with uncertainty is the consideration of appropriate simple reaction functions or "rules" for the setting of the policy interest rate. Since John Taylor's presentation of his much-discussed rule, research on simple policy rules has exploded. Simple rules have several advantages. In particular, they are easy to construct and communicate and are believed by some to be robust, in the sense of generating good results in a variety of economic models. This article provides an overview of the recent research regarding the usefulness and robustness of simple monetary policy rules, particularly in models of the Canadian economy. It also describes and explains the role of simple rules in the conduct of monetary policy in Canada.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Monetary policy and uncertainty
Does Exchange Rate Policy Matter for Growth?
Staff Working Paper 2002-17
Jeannine Bailliu,
Robert Lafrance,
Jean-François Perrault
Previous studies on whether the nature of the exchange rate regime influences a country's medium-term growth performance have been based on a tripartite classification scheme that distinguishes between pegged, intermediate, and flexible exchange rate regimes.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rate regimes,
Exchange rates,
Monetary policy framework
JEL Code(s):
F,
F3,
F31,
F33,
F4,
F43,
O,
O4,
O40
Corporate Bond Spreads and the Business Cycle
Staff Working Paper 2002-15
Zhiwei Zhang
This paper examines the predictive power of credit spreads from the corporate bond market. The high-yield bond spread and investment-grade spread can explain 68 per cent and 42 per cent of output variations one year ahead, while the term spread based on government debts can explain only 12 per cent of them.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Monetary and financial indicators,
Monetary policy transmission
JEL Code(s):
E,
E3,
E5,
G,
G1
Taylor Rules in the Quarterly Projection Model
Staff Working Paper 2002-1
Ben Fung,
Dinah Maclean,
Jamie Armour
In recent years, there has been a lot of interest in Taylor-type rules. Evidence in the literature suggests that Taylor-type rules are optimal in a number of models and are fairly robust across different models.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Monetary policy and uncertainty,
Monetary policy framework
JEL Code(s):
E,
E5,
E52
The Monetary Transmission Mechanism at the Sectoral Level
Staff Working Paper 2001-27
Jean Farès,
Gabriel Srour
This paper relies on simple vector autoregressions to investigate the monetary transmission mechanism in broad sectors of the Canadian economy. Two types of disaggregation are considered: one at the level of final expenditures, and one at the level of production.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy transmission
JEL Code(s):
E,
E5,
E52
An Estimated Canadian DSGE Model with Nominal and Real Rigidities
Staff Working Paper 2001-26
Ali Dib
This paper develops a dynamic, stochastic, general-equilibrium (DGSE) model for the Canadian economy and evaluates the real effects of monetary policy shocks. To generate high and persistent real effects, the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and employment.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy framework
JEL Code(s):
E,
E3,
E31,
E32