November 17, 2001
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86
result(s)
Gaining Credibility for Inflation Targets
Staff Working Paper 2001-11
James Yetman
In this paper, I consider a simple model in which agents learn about the inflation target of a central bank over time by observing the policy instrument or inflation outcomes. Measuring credibility as the distance between the perceived target and the actual target, an increase in credibility is beneficial to the central bank because it brings the policy consistent with attaining the inflation target closer to that required to attain the output target.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Credibility,
Inflation targets
JEL Code(s):
E,
E5,
E52
How Rigid Are Nominal-Wage Rates?
Staff Working Paper 2001-8
Allan Crawford
This study examines the effect of nominal-wage rigidities on wage growth in Canada using a hazard model and micro data for union contracts. The hazard model is specified in a way that allows considerable flexibility in the shape of the estimated notional wage-change distribution.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets,
Labour markets
JEL Code(s):
E,
E2,
E24,
E5,
E52,
E6,
E61
Downward Nominal-Wage Rigidity: Micro Evidence from Tobit Models
Staff Working Paper 2001-7
Allan Crawford,
Geoff Wright
This paper uses Tobit models and data for union contracts to examine the extent of downward nominal-wage rigidity in Canada. To be consistent with important stylized facts, the models allow the variance of the notional wage-change distribution to be time-varying and test for menu-cost effects.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets,
Labour markets
JEL Code(s):
E,
E2,
E24,
E5,
E52,
E6,
E61
The Zero Bound on Nominal Interest Rates: How Important Is It?
Staff Working Paper 2001-6
David Amirault,
Brian O'Reilly
This paper surveys the literature on the zero bound on the nominal interest rate. It addresses questions ranging from the conditions under which the zero bound on the nominal interest rate might occur to policy options to avoid or use to exit from such a situation. We discuss literature that examines historical and country evidence, and literature that uses models to generate evidence on this question.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Credibility,
Inflation targets,
Monetary policy transmission
JEL Code(s):
E,
E3,
E31,
E5,
E52,
E58,
E6,
E61
On Commodity-Sensitive Currencies and Inflation Targeting
Staff Working Paper 2001-3
Kevin Clinton
Two aspects of the recent monetary history of Canada, Australia, and New Zealand stand out: the sensitivity of their dollars to prices of resource-based commodities, and inflation targeting. This paper explores various aspects of these phenomena.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Inflation targets,
International topics,
Monetary policy implementation
JEL Code(s):
E,
E3,
E31,
E5,
E52,
F,
F3,
F31,
F4,
F42
November 13, 2000
Seminar Summary: Price Stability and the Long-Run Target for Monetary Policy
On 8 and 9 June 2000, the Bank held a seminar to examine some key issues affecting the upcoming decision on Canada's inflation-control target for the period after 2001. The main issues covered at the seminar were the extent of downward nominal-wage rigidity and its implications for employment as well as the relative merits of price-level targeting versus inflation targeting. Another critical question that was discussed was how to balance the evidence on all the relevant issues in order to develop an overall view on the appropriate long-run target. The author gives a brief overview of the seminar followed by detailed summaries of individual papers.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation targets
August 16, 2000
The Changing Face of Central Banking in the 1990s
During the 1990s, central banks in the industrialized countries made important changes in the way they operate. As part of these initiatives, central banks have endeavoured to define a set of best practices, learning from each other in the process. The goal was to improve and adapt the frameworks within which monetary policy is implemented. Clarifying Objectives A clear objective is a necessary starting point for any policy framework. The growing consensus that price stability is the most appropriate objective for monetary policy was perhaps one of the most critical developments of the past decade. Price stability is now universally regarded as the key contribution that monetary policy can make to promote sustainable growth and maximize the level of employment. Central banks also need a clear strategy for achieving their objective. A major development of the past decade was the growing popularity of inflation targets as the numerical focus for monetary policy. Clearly defined inflation targets focus policy on the variable that is directly associated with price stability. The Bank of Canada was one of the first to adopt (in 1991) a set of targets for inflation over a specified time horizon. Accountability Many central banks have acquired greater independence and this, together with the public's desire for more information from key public institutions, has raised the standards for accountability. At the same time, explicit targets provide a clear measure against which to judge the performance of the monetary authorities. Increased accountability also has implications for the overall transparency of the monetary authorities. In sum, central banks have become much more open institutions and are placing greater emphasis on their communications activities. As an example, comprehensive inflation reports have become key communications vehicles for a number of central banks. Many of the changes implemented by central banks stem from the desire to improve the credibility of monetary policy, thus making it easier for monetary authorities to achieve their objectives. Although it is difficult to ascertain the overall effect of the evolving policy framework, it is encouraging that inflation and inflation expectations were at low levels at the end of the 1990s, thus providing a solid base for monetary policy in the future.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Credibility,
Inflation targets,
International topics,
Monetary policy framework
Identifying Policy-makers' Objectives: An Application to the Bank of Canada
Staff Working Paper 2000-11
Nicholas Rowe,
James Yetman
In this paper, we develop a new way to test hypotheses about policy-makers' targets, and we implement that test for Canadian monetary policy.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets
JEL Code(s):
E,
E5,
E52,
E6,
E61
Résultats empiriques multi-pays relatifs à l'impact des cibles d'inflation sur la crédibilité de la politique monétaire
Staff Working Paper 1998-23
Pierre St-Amant,
David Tessier
Over the last few years, many countries have adopted inflation targets. The objective of this paper is to report some empirical results that bear on the link between the adoption of inflation targets and the behaviour of the main macroeconomic variables. After a discussion of some recent articles analyzing international experience, some simple statistical tests […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets