Inflation and prices

• April 9, 2009

  Next Steps for Canadian Monetary Policy

  Bank of Canada Review - Spring 2009 Robert Amano, Thomas J. Carter, Donald Coletti

  In 2006, the Bank initiated a research program exploring two alternatives to the current inflation-targeting framework: (i) lowering the inflation target and (ii) shifting to a price-level target. This article discusses progress to date, places the Bank's findings in the context of a broader literature, and identifies avenues for future research.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Economic models, Inflation and prices, Inflation targets, Inflation: costs and benefits, Monetary policy framework
• April 8, 2009

  Price-Level Targeting and Stabilization Policy: A Review

  Bank of Canada Review - Spring 2009 Steve Ambler

  This article reviews arguments in the literature for and against price-level targeting, focusing on its costs and benefits compared with inflation targeting. Benefits of price-level targeting include the effect on forward-looking inflation expectations; the ability to substitute for commitment by a central bank to its future policies; lessening forecast errors; better economic performance in response to real shocks because of lower wage indexation; and a reduction in the problem of the zero lower bound on nominal interest rates.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, Inflation: costs and benefits, Monetary policy framework
• April 5, 2009

  Unexpected Inflation and Redistribution of Wealth in Canada

  Bank of Canada Review - Spring 2009 Césaire Meh, Yaz Terajima

  One of the most important arguments in favour of price stability is that unexpected inflation generates changes in the distribution of income and wealth among different economic agents. These redistributions occur because many loans are specified in fixed dollar terms and unexpected inflation redistributes wealth from creditors to debtors by reducing the real value of nominal assets and liabilities.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Inflation and prices, Inflation: costs and benefits, Sectoral balance sheet

• Information Flows and Aggregate Persistence

  Staff Working Paper 2009-11 Oleksiy Kryvtsov

  Models with imperfect information that generate persistent monetary nonneutrality predominantly rely on assumptions leading to substantial heterogeneity of information across price-setters. This paper develops a quantitative general equilibrium model in which the degree of heterogeneity of information is determined endogenously.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Inflation and prices, Monetary policy transmission JEL Code(s): D, D8, D83, E, E3, E31, E32