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The Monetary Policy Transmission Mechanism and Policy Rules in Canada

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Author Info
David Longworth
Brian O’Reilly

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Abstract

The inflation-targeting regime in place in Canada requires a clear understanding of the monetary policy transmission mechanism and a way to exploit knowledge of that mechanism in taking policy decisions. This paper discusses the Bank of Canada’s current view of the monetary policy transmission mechanism in Canada and the internal research on which it is based, as well as some of the Bank’s research on policy rules. The main objectives in the research on various elements of the monetary policy framework at the Bank of Canada is to find practical ways of addressing the major types of uncertainty in formulating monetary policy. Uncertainty has become particularly important as a research and practical issue in recent years with the shift in focus to how to conduct monetary policy in a low and stable inflation environment. The concluding section outlines three steps that experience and research has led staff at the Bank of Canada to identify as helpful to policy makers in dealing with uncertainty and providing a sharper focus to discussions at key meetings on monetary policy.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 72.

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Date of creation: May 2000
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Handle: RePEc:chb:bcchwp:72

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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.:
  1. Duguay, Pierre, 1994. "Empirical evidence on the strength of the monetary transmission mechanism in Canada: An aggregate approach," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 39-61, February. [Downloadable!] (restricted)
  2. Coulombe, Serge, 1998. "A Non-Paradoxical Interpretation of the Gibson Paradox," Working Papers 98-22, Bank of Canada. [Downloadable!]
  3. Amano, Robert & Coletti, Don & Macklem, Tiff, 1999. "Monetary Rules When Economic Behaviour Changes," Working Papers 99-8, Bank of Canada. [Downloadable!]
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  4. Allan Crawford, 1998. "Measurement biases in the Canadian CPI: An update," Bank of Canada Review, Bank of Canada, vol. 1998(Spring), pages 39-56. [Downloadable!]
  5. Armour, J. & Atta-Mensah, J. & Engert, W. & Hendry, S., 1996. "A Distant-Early-Warning Model of Inflation Based on M1 Disequilibria," Working Papers 96-5, Bank of Canada. [Downloadable!]
  6. Coletti, D. & Hunt, B. & Rose, D. & Tetlow, R., 1996. "The Bank of Canada's New Quarterly Projection Model. Part 3 , the Dynamic Model : QPM," Technical Reports 75, Bank of Canada. [Downloadable!]
  7. Allan Crawford & Seamus Hogan, 1999. "Downward wage rigidity," Bank of Canada Review, Bank of Canada, vol. 1999(Winter), pages 29-48. [Downloadable!]
  8. 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. 1995(Winter), pages 23-40. [Downloadable!]
  9. Don Coletti & Brian O'Reilly, 1998. "Lower inflation: Benefits and costs," Bank of Canada Review, Bank of Canada, vol. 1998(Autumn), pages 3-21. [Downloadable!]
  10. Crawford, A & Kasumovich, M, 1996. "Does Inflation Uncertainty Vary with the Level of Inflation?," Working Papers 96-09, Bank of Canada. [Downloadable!]
  11. Dupasquier, Chantal & Ricketts, Nicholas, 1998. "Non-Linearities in the Output-Inflation Relationship: Some Empirical Results for Canada," Working Papers 98-14, Bank of Canada. [Downloadable!]
  12. Barry Cozier & Greg Tkacz, 1994. "The Term Structure and Real Activity in Canada," Macroeconomics 9406001, EconWPA, revised 23 Jun 1994. [Downloadable!]
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  13. Duguay, Pierre & Longworth, David, 1998. "Macroeconomic models and policy making at the bank of canada," Economic Modelling, Elsevier, vol. 15(3), pages 357-375, July. [Downloadable!] (restricted)
  14. Pierre Duguay & Stephen Poloz, 1994. "The Role of Economic Projections in Canadian Monetary Policy Formulation," Canadian Public Policy, University of Toronto Press, vol. 20(2), pages 189-199, June. [Downloadable!] (restricted)
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  1. Bennett T. McCallum & Edward Nelson, 2005. "Targeting versus instrument rules for monetary policy," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 225-245. [Downloadable!]
    Other versions:
  2. Bennett T. McCallum & Edward Nelson, 2004. "Targeting vs. Instrument Rules for Monetary Policy," NBER Working Papers 10612, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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