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Canadian Monetary Policy: Will the Checklist Approach Ever Get Us to Price Stability?

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Author Info

  • Daniel Racette
  • Jacques Raynauld

Abstract

The purpose of this paper is to investigate whether the checklist approach that the Bank of Canada has followed in one way or another over the last two decades is likely to lead us to the stated objective of price stability. The analysis of Canadian monetary policy is performed through the estimation of a Bayesian VAR model of a set of important Canadian macroeconomic variables in their international context. To estimate the model the authors borrowed form C. Sims (1989), but they also transposed his methodology to take into account Canadian features. The results suggest that the exchange rate has been high on the checklist of the Bank of Canada over the years and that, rather, the Bank should concentrate its attention on (broad) monetary aggregates if it really wants to deliver price stability.

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File URL: http://links.jstor.org/sici?sici=0008-4085%28199211%2925%3A4%3C819%3ACMPWTC%3E2.0.CO%3B2-P
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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 25 (1992)
Issue (Month): 4 (November)
Pages: 819-38

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Handle: RePEc:cje:issued:v:25:y:1992:i:4:p:819-38

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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Cited by:
  1. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August.
  2. Ronald H. Lange, 2013. "Monetary policy reactions and the exchange rate: a regime-switching structural VAR for Canada," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(5), pages 612-632, September.
  3. Apergis, Nicholas, 1998. "Inflation and Uncertainty: Does the EMS Participation Play Any Role?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 586-605.
  4. Zha, Tao, 1999. "Block recursion and structural vector autoregressions," Journal of Econometrics, Elsevier, vol. 90(2), pages 291-316, June.

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