Advanced Search
MyIDEAS: Login

Expected Inflation in Canada 1988-1995: An Evaluation of Bank of Canada Credibility and the Effect of Inflation Targets

Contents:

Author Info

  • David R. Johnson
Registered author(s):

    Abstract

    Between 1988 and 1995 actual inflation in Canada fell while expected inflation did not fall as rapidly. The Bank of Canada made three attempts to signal its policy of lower inflation: a series of speeches from January to June of 1988, the announcement of inflation targets in February 1991, and the reaffirmation of inflation targets in December 1993. This paper finds that only the 1988 speeches reduced expected inflation. There is considerable evidence that inflation targets were credible and that the 1993 change in Governor was handled so that expected inflation both remained within the target range and continued to fall.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://links.jstor.org/sici?sici=0317-0861%28199709%2923%3A3%3C233%3AEIIC1A%3E2.0.CO%3B2-3
    Download Restriction: only available to JSTOR subscribers

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by University of Toronto Press in its journal Canadian Public Policy.

    Volume (Year): 23 (1997)
    Issue (Month): 3 (September)
    Pages: 233-258

    as in new window
    Handle: RePEc:cpp:issued:v:23:y:1997:i:3:p:233-258

    Contact details of provider:
    Postal: University of Toronto Press Journals Division 5201 Dufferin Street Toronto, Ontario, Canada M3H 5T8
    Email:
    Web page: http://economics.ca/cpp/

    Order Information:
    Email:
    Web: http://www.utpjournals.com/cpp/

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
    2. Christopher Ragan, 1995. "Deriving Agents' Inflation Forecasts from the Term Structure of Interest Rates," Macroeconomics 9502003, EconWPA.
    3. Smyth, David J., 1992. "Measurement errors in survey forecasts of expected inflation and the rationality of inflation expectations," Journal of Macroeconomics, Elsevier, vol. 14(3), pages 439-448.
    4. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
    5. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
    6. Croushore, Dean & Koot, Ronald S., 1994. "A measure of federal reserve credibility," Journal of Policy Modeling, Elsevier, vol. 16(2), pages 215-231, April.
    7. Blackburn, Keith & Christensen, Michael, 1989. "Monetary Policy and Policy Credibility: Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 27(1), pages 1-45, March.
    8. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
    9. Bryan, Michael F & Gavin, William T, 1986. "Models of Inflation Expectations Formation: A Comparison of Household and Economist Forecasts: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 539-44, November.
    10. Batchelor, Roy & Orr, Adrian, 1991. "Inflation uncertainty, inflationary shocks and the credibility of counterinflation policy," European Economic Review, Elsevier, vol. 35(7), pages 1385-1397, October.
    11. Nicholas Ricketts & David Rose, . "Inflation, Learning And Monetary Policy Regimes In The G-7 Economies," Working Papers 95-6, Bank of Canada.
    12. Laurence Ball & Dean Croushore, 1995. "Expectations and the Effects of Monetary Policy," NBER Working Papers 5344, National Bureau of Economic Research, Inc.
    13. P Clark & D Laxton, 1997. "Phillips Curves," CEP Discussion Papers dp0344, Centre for Economic Performance, LSE.
    14. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    15. Gramlich, Edward M, 1983. "Models of Inflation Expectations Formation: A Comparison of Household and Economist Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 155-73, May.
    16. Persson, Torsten, 1988. "An introduction and a broad survey," European Economic Review, Elsevier, vol. 32(2-3), pages 519-532, March.
    17. Kevin Clinton, 1995. "The term structure of interest rates as a leading indicator of economic activity: A technical note," Bank of Canada Review, Bank of Canada, vol. 1994(Winter), pages 23-40.
    18. Cumby, Robert E. & Huizinga, John & Obstfeld, Maurice, 1983. "Two-step two-stage least squares estimation in models with rational expectations," Journal of Econometrics, Elsevier, vol. 21(3), pages 333-355, April.
    19. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Miles, William, 2008. "Inflation targeting and monetary policy in Canada: What is the impact on inflation uncertainty?," The North American Journal of Economics and Finance, Elsevier, vol. 19(2), pages 235-248, August.
    2. David Longworth & Brian O’Reilly, 2000. "The Monetary Policy Transmission Mechanism and Policy Rules in Canada," Working Papers Central Bank of Chile 72, Central Bank of Chile.
    3. El-Shagi, Makram & Giesen, Sebastian & Jung, Alexander, 2014. "Does the federal reserve staff still beat private forecasters?," Working Paper Series 1635, European Central Bank.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:cpp:issued:v:23:y:1997:i:3:p:233-258. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.