E31 - Price Level; Inflation; Deflation

• August 16, 2012

  Measurement Bias in the Canadian Consumer Price Index: An Update

  Bank of Canada Review - Summer 2012 Patrick Sabourin

  The consumer price index (CPI) is the most commonly used measure to track changes in the overall level of prices. Since it departs from a true cost-of-living index, the CPI is subject to four types of measurement bias—commodity substitution, outlet substitution, new goods and quality adjustment. The author updates previous Bank of Canada estimates of measurement bias in the Canadian CPI by examining these four sources of potential bias. He finds the total measurement bias over the 2005–11 period to be about 0.5 percentage point per year, consistent with the Bank’s earlier findings. Slightly more than half of this bias is caused by the fixed nature of the CPI basket of goods and services.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, Inflation targets JEL Code(s): E, E3, E31, E5, E52

• Inflation and Growth: A New Keynesian Perspective

  Staff Working Paper 2012-23 Robert Amano, Thomas J. Carter, Kevin Moran

  The long-run relation between growth and inflation has not yet been studied in the context of nominal price and wage rigidities, despite the fact that these rigidities now figure prominently in workhorse macroeconomic models.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation: costs and benefits JEL Code(s): E, E3, E31, E5, E52, O, O3, O31, O4, O42

• 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

• Time-Varying Effects of Oil Supply Shocks on the U.S. Economy

  Staff Working Paper 2012-2 Christiane Baumeister, Gert Peersman

  We use vector autoregressions with drifting coefficients and stochastic volatility to investigate how the dynamic effects of oil supply shocks on the U.S. economy have changed over time. We find a substantial decline in the short-run price elasticity of oil demand since the mid-eighties.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): E, E3, E31, E32, Q, Q4, Q43