Posts

• June 11, 2006

  Evaluating Measures of Core Inflation

  Bank of Canada Review - Summer 2006 Thérèse Laflèche, Jamie Armour

  Since the Bank of Canada adopted inflation targeting in 1991, it has focused on a measure of core inflation as a shorter-term guide for monetary policy. When the targets were renewed in 2001, the Bank adopted CPIX as its measure of core inflation because of the advantages it offered. Leflèche and Armour review the experience with CPIX and whether the criteria used to select it in 2001 still favour the measure today. They describe the various measures of core inflation monitored by the Bank and evaluate them on the basis of the volatility of the components, the volatility of the core measures themselves, absence of bias relative to total CPI, predictive power, and certain practical criteria, including timeliness and credibility. They conclude that CPIX still satisfies all the empirical and practical criteria.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, Inflation targets, Monetary policy framework
• June 8, 2006

  Floating Dollar, Anchored Inflation: The Role of the Exchange Rate in Canada's Monetary Policy Framework

  Remarks Tiff Macklem Lunenburg Board of Trade Lunenburg, Nova Scotia

  The two key components of the Bank's monetary policy framework are an "anchor," the inflation target, and a "float," the flexible exchange rate. Living by the ocean, you know better than I that a good mooring is one that keeps a boat in place, yet allows some give and take for the wind and the tide.

  Content Type(s): Press, Speeches and appearances, Remarks

• Launching the NEUQ: The New European Union Quarterly Model, A Small Model of the Euro Area and U.K. Economies

  Staff Working Paper 2006-22 Anna Piretti, Charles St-Arnaud

  The authors develop a projection model of the euro area and the United Kingdom. The model consists of two country blocks, endogenous to each other via the foreign demand channel.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): C, C5, C53, E, E1, E17, E3, E37
• June 2, 2006

  Another Look at the Inflation-Target Horizon

  Bank of Canada Review - Summer 2006 Donald Coletti, Jack Selody, Carolyn A. Wilkins

  The conduct of monetary policy within an inflation-targeting framework requires the establishment of an inflation-target horizon, which is the average time it takes inflation to return to the target. Policy-makers have an interest in communicating this horizon, since it is likely to help anchor inflation expectations. This article focuses on the determination of the appropriate policy horizon by reporting on two recent Bank of Canada studies. The evidence suggests that the current target horizon of six to eight quarters remains appropriate. It is important to note that the duration of the optimal inflation-target horizon varies widely, depending on the combination of shocks to the economy. In rare cases when the financial accelerator is triggered by a persistent shock, such as an asset-price bubble, it may be appropriate to take a longer view of the inflation-target horizon.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation targets, Monetary policy framework, Monetary policy transmission

• The International Monetary Fund's Balance-Sheet and Credit Risk

  Staff Working Paper 2006-21 Ryan Felushko, Eric Santor

  The authors examine the characteristics of International Monetary Fund (IMF) lending from the 1960s to 2005.

  Content Type(s): Staff research, Staff working papers Topic(s): International topics JEL Code(s): F, F3

• Examining the Trade-Off between Settlement Delay and Intraday Liquidity in Canada's LVTS: A Simulation Approach

  Staff Working Paper 2006-20 Neville Arjani

  The author explores a fundamental trade-off that occurs between settlement delay and intraday liquidity in the daily operation of large-value payment systems (LVPS), with specific application to Canada's Large Value Transfer System (LVTS).

  Content Type(s): Staff research, Staff working papers Topic(s): Payment clearing and settlement systems JEL Code(s): E, E4, E47, G, G2, G21
• May 30, 2006

  Opening Statement before the House of Commons Standing Committee on Industry, Science and Technology

  Opening statement David Dodge House of Commons Standing Committee on Industry, Science and Technology

  The Bank of Canada Act calls on us to "mitigate … fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada." Over time, it has become clear that the best way for us to fulfill this mandate is to keep inflation low, stable, and predictable.

  Content Type(s): Press, Speeches and appearances, Opening statements
• May 24, 2006

  Bank of Canada raises overnight rate target by 1/4 percentage point to 4 1/4 per cent

  Media Relations Ottawa, Ontario

  The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 4 1/4 per cent.

  Content Type(s): Press, Press releases
• May 5, 2006

  The Crucial Contribution of the Financial System and Monetary Policy to Economic Development

  Remarks David Longworth Conference of the Association des économistes québécois Montréal, Quebec

  Many analysts have examined the relationship between the financial system and economic development. They have uncovered some interesting facts regarding the characteristics of the financial system - characteristics that contribute to the best possible allocation of savings to productive investments, which are themselves engines of economic growth.

  Content Type(s): Press, Speeches and appearances, Remarks

• Institutional Quality, Trade, and the Changing Distribution of World Income

  Staff Working Paper 2006-19 Brigitte Desroches, Michael Francis

  Conventional wisdom holds that institutional changes and trade liberalization are two main sources of growth in per capita income around the world.

  Content Type(s): Staff research, Staff working papers Topic(s): Development economics, International topics JEL Code(s): F, F1, F11, F15, O, O1, O11, P, P4, P48