Inflation and prices

• December 10, 2007

  Inflation Targeting, Price-Level Targeting, and Fluctuations in Canada's Terms of Trade

  Bank of Canada Review - Winter 2007-2008 Donald Coletti, René Lalonde

  Coletti and Lalonde compare inflation targeting and price-level targeting in the context of a small open economy subject to sizable terms-of-trade shocks. The authors summarize recent research that compares the ability of price-level targeting and inflation targeting to stabilize the macroeconomy when confronted with shocks similar to those experienced by Canada in recent years. Their preliminary results suggest that price-level targeting may represent a feasible alternative to traditional inflation targeting. Their article also provides insight into the direction of current research in this area at the Bank.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Inflation and prices, Monetary policy framework
• October 14, 2007

  The Effect of China on Global Prices

  Bank of Canada Review - Autumn 2007 Michael Francis

  The dramatic growth in China's exports of consumer goods such as clothing, toys, and electronics, and imports of primary commodities such as oil and metals is having major effects on global supply and demand. In examining China's role in global relative price changes, Francis finds that downward pressure on the relative prices of consumer goods is likely to persist as China's large labour supply continues its migration into manufacturing. Likewise, China's size and growth will also remain key drivers of global commodities demand for some time. Despite these forces, inflation-targeting central banks have the tools to keep inflation close to target, thus offsetting any persistent upward or downward inflationary pressure.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, International topics, Recent economic and financial developments

• The Direct Effect of China on Canadian Consumer Prices: An Empirical Assessment

  Staff Discussion Paper 2007-10 Louis Morel

  The author investigates the direct effect of Chinese imported goods on consumer prices in Canada. On average, over the 2001–06 period, the direct effect of consumer goods imported from China is estimated to have reduced the inflation rate by about 0.1 percentage points per year. This disinflationary effect is due to two causes: first, the […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation and prices JEL Code(s): E, E3, E31

• Gold Prices and Inflation

  Staff Working Paper 2007-35 Greg Tkacz

  Using data for 14 countries over the 1994 to 2005 period, we assess the leading indicator properties of gold at horizons ranging from 6 to 24 months.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Inflation and prices JEL Code(s): E, E3, E31, E4, E44

• Oil Price Movements and the Global Economy: A Model-Based Assessment

  Staff Working Paper 2007-34 Selim Elekdag, René Lalonde, Douglas Laxton, Dirk Muir, Paolo Pesenti

  We develop a five-region version (Canada, an oil exporter, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Inflation and prices, International topics JEL Code(s): E, E6, E66, F, F3, F32, F4, F47

• Micro Foundations of Price-Setting Behaviour: Evidence from Canadian Firms

  Staff Working Paper 2007-31 Daniel de Munnik, Kuan Xu

  How do firms adjust prices in the marketplace? Do they tend to adjust prices infrequently in response to changes in market conditions? If so, why? These remain key questions in macroeconomics, particularly for central banks that work to keep inflation low and stable.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Monetary policy transmission JEL Code(s): D, D4, D40, E, E3, E30, L, L1, L11

• Does Indexation Bias the Estimated Frequency of Price Adjustment?

  Staff Working Paper 2007-15 Maral Kichian, Oleksiy Kryvtsov

  We assess the implications of price indexation for estimated frequency of price adjustment in sticky price models of business cycles. These models predominantly assume that non-reoptimized prices are indexed to lagged or average inflation.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Economic models, Inflation and prices JEL Code(s): E, E3, E31, E37