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Precision Targeting: The Economics – and Politics – of Improving Canada’s Inflation-Targeting Framework

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  • Christopher Ragan

    (McGill University)

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    Abstract

    The Bank of Canada’s inflation-targeting framework, since its inception in 1991, has proven itself a success. Yet further improvements in the system should be considered seriously for inclusion in a renewed monetary policy agreement, between the Bank of Canada and the federal government, and renewal is due in 2011. Some improvements would deliver genuine economic benefits to millions of Canadians over the years ahead. Lowering the target rate for consumer price inflation in particular would help secure the domestic purchasing power of our financial assets. Such a change, however, should be part of a coherent framework, which addresses financial stability goals and political imperatives.

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    Bibliographic Info

    Article provided by C.D. Howe Institute in its journal C.D. Howe Institute Commentary.

    Volume (Year): (2011)
    Issue (Month): 321 (February)
    Pages:

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    Handle: RePEc:cdh:commen:321

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    Keywords: Monetary Policy; Bank of Canada; inflation targeting; Statistics Canada; CPI; Ministry of Finance; Office of the Superintendent of Financial Institutions;

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    1. Allan Crawford & Seamus Hogan, 1999. "Downward wage rigidity," Bank of Canada Review, Bank of Canada, Bank of Canada, vol. 1998(Winter), pages 29-48.
    2. David Longworth, 2010. "Warding Off Financial Market Failure: How to Avoid Squeezed Margins and Bad Haircuts," C.D. Howe Institute Backgrounder, C.D. Howe Institute, C.D. Howe Institute, issue 135, December.
    3. Angelo Melino, 2011. "Moving Monetary Policy Forward: Why Small Steps - and a Lower Inflation Target - Make Sense for the Bank of Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, C.D. Howe Institute, issue 319, January.
    4. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 62(1), pages 1-18, March.
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