Posts
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Some Notes on Monetary Policy Rules with Uncertainty
The author explores the role that Taylor-type rules can play in monetary policy, given the degree of uncertainty in the economy. The optimal rule is derived from a simple infinite-horizon model of the monetary transmission mechanism, with only additive uncertainty. -
The Syndicated Loan Market: Developments in the North American Context
The author describes the rapid development of the syndicated corporate loan market in the 1990s. He explores the historical forces that led to the development of the contemporary U.S. syndicated loan market, which is effectively a hybrid of the investment banking and commercial banking worlds. -
An Index of Financial Stress for Canada
The authors develop an index of financial stress for the Canadian financial system. Stress is defined as the force exerted on economic agents by uncertainty and changing expectations of loss in financial markets and institutions. -
May 23, 2003
The Bank of Canada: Moving Towards Transparency
During the 1990s the Bank of Canada made several changes that transformed its conduct of monetary policy. In the 1960s and 1970s, policy decisions were made in an environment characterized by instrument opaqueness and goal opaqueness, which tended to shield the Bank's operations from scrutiny and accountability. Since the 1970s the Bank has moved towards transparency and openness by rejecting multiple policy instruments and adopting a single, well-defined goal of inflation control. A recent survey has shown that the Bank of Canada is in the middle range of central banks with regard to its transparency and has lost points for not publishing the forecasts that shape its policy or the minutes and voting records of its governing body. Chant suggests that the public has benefited significantly from the changes the Bank has made, but that it should continue to support research on the benefits of low and stable inflation and continually inform other policy-makers and the public of the results. -
May 22, 2003
Bank of Canada Review - Spring 2003
Cover page
Seventeenth-Century English Tradesmen's Tokens
The tokens pictured on the cover are part of the National Currency Collection.
Photographed by Gord Carter, Ottawa.
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May 22, 2003
Inflation Targeting and Medium-Term Planning: Some Simple Rules of Thumb
Inflation targeting, a stable macroeconomic environment, and an average growth rate for potential output that is not expected to vary much in the next several years all help households, businesses, and governments in their medium-term economic and financial planning. Several simple rules of thumb can be usefully employed in this planning. Specifically, inflation targeting has maintained most major measures of inflation quite close to the target midpoint on average over a number of years. Combined with a clear fiscal framework, this has contributed to a more stable macroeconomic environment in which output varies less around its potential level. Potential output growth is expected to average around 3 per cent over the next several years. In light of these factors and historical relationships, labour income, profits, and consumer spending will likely grow, on average, by about 5 per cent over the medium term. Real and nominal long-term interest rates should also continue to be stable, with real 30-year yields varying around 3.5 or 4.0 per cent, and nominal yields varying around 5.5 or 6.0 per cent. -
May 21, 2003
Conference Summary: Price Adjustment and Monetary Policy
The 2002 Bank of Canada Conference focused on price adjustment, a critically important issue for monetary policy. Given the acceptance throughout the 1990s and 2000s of the existence of price stickiness in goods or labour markets, or both, and of the important role that monetary policy can play in an economy, the time was right for a conference that would focus on current developments in this area of research, particularly within a Canadian context. Conference papers covering both theoretical and empirical studies explored such themes as sources of the persistence of inflation, forward-looking models of inflation, models of inflation in open economies, the macroeconomic effects of technology shocks, and models of the interaction between wages, prices, and real economic outcomes. -
May 20, 2003
Updating the Bank of Canada Commodity Price Index
The Bank of Canada Commodity Price Index (BCPI) summarizes the price movements of 23 commodities produced in Canada. Information provided by the BCPI is used in analyzing movements in GDP, industrial producer prices, inflation, and the exchange rate. Effective 15 May 2003, a number of changes will be reflected in the BCPI. To ensure that the index accurately reflects the natural resource sectors of the economy, a number of new components and pricing sources have been incorporated into the BCPI. Weights in the new index will be chained to 1 January 1991 and 1 January 2000 to better reflect contemporary values. -
May 13, 2003
Policies to Sustain Growth Domestically and Internationally
I have been looking forward to coming to Amsterdam since Governor Wellink extended the invitation last year. I must say that when you consider what has been happening in the world economy, it is certainly an interesting time to be a Canadian at international meetings such as the BIS meeting I attended yesterday.