May 12, 1998
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282
result(s)
Forecasting Inflation with the M1-VECM: Part Two
Staff Working Paper 1998-6
Walter Engert,
Scott Hendry
A central bank's main concern is the general direction of future inflation, and not transitory fluctuations of the inflation rate. As a result, this paper is concerned with forecasting a simple measure of the trend of inflation, the eight-quarter CPI-inflation rate. The primary objective is to improve the M1-based vector-error-correction model (VECM) developed by Hendry […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Inflation and prices,
Monetary aggregates
JEL Code(s):
C,
C3,
C5,
E,
E3,
E4,
E5
The Benefits of Low Inflation: Taking Stock
Technical Report No. 83
Brian O'Reilly
This paper surveys the empirical literature on the benefits of low inflation, emphasizing contributions since 1990. It follows the framework of a section in the Bank's 1990 Annual Report, "The benefits of price stability."
Content Type(s):
Staff research,
Technical reports
Topic(s):
Inflation: costs and benefits
JEL Code(s):
E,
E3
November 13, 1997
Statistical measures of the trend rate of inflation
As a guide for the conduct of monetary policy, most central banks make use of a trend inflation index similar to that employed by the Bank of Canada: the CPI excluding food, energy, and the effect of indirect taxes. In addition to their basic reference index, some central banks regularly publish statistical measures of the trend rate of inflation. The method used for producing these measures is, for the most part, based on the hypothesis that extreme price fluctuations generally reflect temporary shocks to the inflation rate, rather than its underlying trend. In this paper, the author offers a broad survey of studies on the measurement of trend inflation that have been published by the Bank of Canada and presents the results of the most recent work on the subject. Particular attention is paid to two statistical measures that the Bank follows more closely than other measures; namely, the CPIX, a price index that excludes eight of the most volatile CPI components, and CPIW, a measure that retains all the components of the overall index but gives a lower weighting to the most volatile.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation and prices
A Measure of Underlying Inflation in the United States
Staff Working Paper 1997-20
Iris Claus
A monetary authority with the primary objective of price stability has to distinguish between temporary price shocks and persistent shocks to the rate of inflation. A measure of underlying inflation, therefore, has an important role to play as a guideline for monetary policy.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation and prices,
International topics
JEL Code(s):
E,
E3,
E31
Menu Costs, Relative Prices, and Inflation: Evidence for Canada
Staff Working Paper 1997-14
Robert Amano,
Tiff Macklem
The menu-cost models of price adjustment developed by Ball and Mankiw (1994;1995) predict that short-run movements in inflation should be positively related to the skewness and the variance of the distribution of disaggregated relative-price shocks in each period. We test these predictions on Canadian data using the distribution of changes in disaggregated producer prices to measure the skewness and standard deviation of relative-price shocks.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation and prices,
Monetary policy framework
JEL Code(s):
C,
C5,
C52,
E,
E3,
E31
What Does Downward Nominal-Wage Rigidity Imply for Monetary Policy?
Staff Working Paper 1997-13
Seamus Hogan
A recent paper has suggested there might be a trade-off between inflation and unemployment at low inflation rates and this has led some economists to recommend that Canada increase its inflation rate.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets,
Monetary policy framework,
Monetary policy transmission
JEL Code(s):
C,
C5,
C52,
E,
E2,
E24,
E5,
E50
May 13, 1997
Capacity constraints, price adjustment, and monetary policy
The short-run Phillips curve describes a positive short-run relationship between the level of economic activity and inflation. When the level of demand in the economy as a whole runs ahead of the level of output that the economy can supply in the short run, price pressures increase and inflation rises. This article reviews the origins of the short-run Phillips curve with particular emphasis on the long-standing idea that the shape of this curve may be non-linear, with inflation becoming more sensitive to changes in output when the cycle of economic activity is high than when it is low. This type of non-linearity in the short-run Phillips curve, which is typically motivated by the effects of capacity constraints that limit the ability of the economy to expand in the short run, has recently attracted renewed attention. The article surveys recent research that finds some evidence of this type of non-linearity in the Phillips curve in Canada and considers the potential implications for monetary policy.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation and prices,
Monetary policy transmission,
Potential output
A Band-Aid Solution to Inflation Targeting
Staff Working Paper 1997-11
Robert Amano,
Richard Black,
Marcel Kasumovich
This paper reviews selectively the literature on exchange rate target zones and corresponding methodologies and examines whether they can be used to analyse the inflation-control problem.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets
JEL Code(s):
E,
E3,
E31,
E5,
E50
Mesures du taux d'inflation tendanciel
Staff Working Paper 1997-9
Thérèse Laflèche
In this paper, the author calculates new measures of the trend inflation rate using changes in the components of total CPI; the hypothesis is that extreme fluctuations in certain prices reflect temporary supply shocks rather than any basic price trend.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation and prices
JEL Code(s):
E,
E3,
E31