E52 - Monetary Policy

• Commodities and Monetary Policy: Implications for Inflation and Price Level Targeting

  Staff Working Paper 2012-16 Donald Coletti, René Lalonde, Paul Masson, Dirk Muir, Stephen Snudden

  We examine the relative ability of simple inflation targeting (IT) and price level targeting (PLT) monetary policy rules to minimize both inflation variability and business cycle fluctuations in Canada for shocks that have important consequences for global commodity prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Inflation and prices, International topics, Monetary policy framework JEL Code(s): E, E1, E17, E3, E31, E37, E5, E52, F, F4, F41, Q, Q4, Q43
• May 17, 2012

  Inflation Targeting: The Recent International Experience

  Bank of Canada Review - Spring 2012 Robert Lavigne, Rhys R. Mendes, Subrata Sarker

  In the years since the 2006 renewal of Canada’s inflation-control agreement, monetary policy regimes have faced significant shocks, including the global economic and financial crisis. This article reviews the recent experience with inflation targeting, including the debate about the appropriate role of monetary policy in maintaining financial stability. In the aftermath of the crisis, both […]

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Credibility, Financial stability, Inflation targets, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52, E58

• Bank Leverage Regulation and Macroeconomic Dynamics

  Staff Working Paper 2011-32 Ian Christensen, Césaire Meh, Kevin Moran

  This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial institutions, Financial system regulation and policies, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E52, G, G2, G21

• Do Low Interest Rates Sow the Seeds of Financial Crises?

  Staff Working Paper 2011-31 Simona Cociuba, Malik Shukayev, Alexander Ueberfeldt

  A view advanced in the aftermath of the late-2000s financial crisis is that lower than optimal interest rates lead to excessive risk taking by financial intermediaries.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial system regulation and policies, Monetary policy transmission JEL Code(s): D, D5, D53, E, E4, E44, E5, E52, G, G2, G28

• Price-Level Targeting and Inflation Expectations: Experimental Evidence

  Staff Working Paper 2011-18 Robert Amano, Jim Engle-Warnick, Malik Shukayev

  In this paper, we use an economics decision-making experiment to test a key assumption underpinning the efficacy of price-level targeting relative to inflation targeting for business cycle stabilization and mitigating the effects of the zero lower bound on nominal interest rates.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E32, E5, E52

• Has the Inclusion of Forward-Looking Statements in Monetary Policy Communications Made the Bank of Canada More Transparent?

  Staff Discussion Paper 2010-15 Christine Fay, Toni Gravelle

  To investigate the extent to which the transparency of the Bank of Canada's monetary policy has improved, the authors examine empirically – over the period 30 October 2000 to 31 May 2007 – the reaction of Canadian financial markets to official Bank communications, and in particular their reaction to the recent inclusion of forward-looking policy-rate guidance in these communications.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Interest rates, Monetary policy communications, Monetary policy transmission JEL Code(s): E, E5, E52, E58

• The Transmission of Shocks to the Chinese Economy in a Global Context: A Model-Based Approach

  Staff Working Paper 2010-17 Jeannine Bailliu, Patrick Blagrave

  To better understand the dynamics of the Chinese economy and its interaction with the global economy, the authors incorporate China into an existing model for the G-3 economies (i.e., the United States, the euro area, and Japan), paying particular attention to modelling the exchange rate and monetary policy in China.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Exchange rate regimes, International topics JEL Code(s): E, E3, E32, E5, E52, F, F4, F41

• Inflation and Unemployment in Competitive Search Equilibrium

  Staff Working Paper 2010-15 Mei Dong

  Using a monetary search model, Rocheteau, Rupert and Wright (2007) show that the relationship between inflation and unemployment can be positive or negative depending on the primitives of the model. The key features are indivisible labor, nonseparable preferences and bargaining.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation: costs and benefits JEL Code(s): E, E1, E12, E13, E4, E40, E5, E52

• Alternative Optimized Monetary Policy Rules in Multi-Sector Small Open Economies: The Role of Real Rigidities

  Staff Working Paper 2010-9 Carlos De Resende, Ali Dib, Maral Kichian

  Inflation-targeting central banks around the world often state their inflation objectives with regard to the consumer price index (CPI). Yet the literature on optimal monetary policy based on models with nominal rigidities and more than one sector suggests that CPI inflation is not always the best choice from a social welfare perspective.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Inflation targets, Inflation: costs and benefits, Monetary policy framework, Monetary policy implementation JEL Code(s): E, E4, E5, E52, F, F3, F4

• Price Level Targeting: What Is the Right Price?

  Staff Working Paper 2010-8 Malik Shukayev, Alexander Ueberfeldt

  Various papers have suggested that Price-Level targeting is a welfare improving policy relative to Inflation targeting. From a practical standpoint, this raises an important yet unanswered question: What is the optimal price index to target?

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E32, E5, E52