April 25, 2009
Publications
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April 22, 2009
Monetary Policy Report – April 2009
In an environment of continued high uncertainty, the global recession has intensified and become more synchronous since the Bank’s January Monetary Policy Report Update, with weaker-than-expected activity in all major economies.
Errata: The source for Chart 1 (on page 3) is Global Insight, not the Bank of Canada. As well, in chart 15 (on page18), the base year for the exchange rate index CERI excluding the U.S. dollar should read 1992=100, not 1997=100.
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April 13, 2009
Business Outlook Survey - Spring 2009
Business sentiment remains negative. While some indicators have inched up from historical lows, the results of the spring survey continue to suggest a weak outlook for the Canadian economy.
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April 9, 2009
Next Steps for Canadian Monetary Policy
In 2006, the Bank initiated a research program exploring two alternatives to the current inflation-targeting framework: (i) lowering the inflation target and (ii) shifting to a price-level target. This article discusses progress to date, places the Bank's findings in the context of a broader literature, and identifies avenues for future research. -
April 9, 2009
Bank of Canada Review - Spring 2009
Examination of progress in the Bank’s exploration of two alternatives to the current inflation-targeting framework: (i) lowering the inflation target and (ii) shifting to a price-level target; a review of arguments for and against price-level targeting, focusing on its costs and benefits compared with inflation targeting; assessing the merits of price-level targeting vis-à-vis inflation targeting from a debt-revaluation perspective; quantifying redistribution of wealth in Canada in the face of unexpected inflation.
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April 8, 2009
Price-Level Targeting and Stabilization Policy: A Review
This article reviews arguments in the literature for and against price-level targeting, focusing on its costs and benefits compared with inflation targeting. Benefits of price-level targeting include the effect on forward-looking inflation expectations; the ability to substitute for commitment by a central bank to its future policies; lessening forecast errors; better economic performance in response to real shocks because of lower wage indexation; and a reduction in the problem of the zero lower bound on nominal interest rates. -
April 7, 2009
Price-Level Uncertainty, Price-Level Targeting, and Nominal Debt Contracts
Many central banks around the world have embraced inflation targeting as a monetary policy framework. Interest is growing, however, in price-level targeting as an alternative. The choice of frameworks has important consequences for financial contracts, most of which are not fully indexed to the price level. Changes in the price level therefore lead to changes in the real value of contracts. -
April 5, 2009
Unexpected Inflation and Redistribution of Wealth in Canada
One of the most important arguments in favour of price stability is that unexpected inflation generates changes in the distribution of income and wealth among different economic agents. These redistributions occur because many loans are specified in fixed dollar terms and unexpected inflation redistributes wealth from creditors to debtors by reducing the real value of nominal assets and liabilities.