Search

Many emerging-market economies (EMEs) have significantly improved their macroeconomic fundamentals and undergone structural reforms since the Asian crisis. These developments have enhanced the composition of capital flows to EMEs through an improved debt structure, a larger share of capital flows as foreign direct investment, and greater access to international debt markets for corporations in EMEs. Structural changes in the global financial landscape have also increased capital flows, bringing economic and financial benefits to EMEs. During the recent financial crisis, however, the opening up of capital accounts and increased financial and trade linkages left many countries vulnerable to external disruptions. Countries with sound fundamentals have weathered the crisis relatively well. Policy-makers in EMEs need to implement policies that support capital flows and ensure that controls imposed to deal with detrimental outflows during periods of stress or rapid inflows are only temporary.

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The Bank of Canada today increased its target for the overnight rate to ½ %, with the Bank Rate at ¾ % and the deposit rate at ½ %.

What I propose to do on this panel today is to talk about stabilization policy and policy co-operation from the viewpoint of an industrial country that has a floating exchange rate and both an explicit inflation target for monetary policy and a clear objective for fiscal policy.

The current monetary policy framework of the Fed intends to be more ’inclusive’ by running the economy hot for longer during expansions.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

Given technological advances and the widespread use of the Internet, various digital currencies have emerged. In most cases, Internet platforms such as Facebook and Amazon restrict the functionality of their digital currencies to enhance the business model and maximize their profits. While platform-based digital currencies could increase the efficiency of retail payments, they could also raise some important policy issues if they were to become widely used outside of the platform. Thus, it is important to closely monitor the evolution of these digital currencies.

Central bankers from inflation-targeting and non-inflation-targeting countries around the world and several distinguished scholars assembled at the Bank of Canada in July 2008 to review the international experience in some detail. This article highlights topics covered in the special lectures and sessions, including how inflation targeting can manage external shocks, various ways in which monetary policy decisions are taken, and the issues of transparency and communications. It also reports on the discussion in the closing panel, which considered options for the future of inflation targeting.

When countries are hit by supply shocks, central banks often face the dilemma of either looking through such shocks or reacting to them to ensure that inflation expectations remain anchored. In this paper, we propose a tractable framework to capture this dilemma and then explore optimal policy under a range of assumptions about how expectations are formed.