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Core inflation at the Bank of Canada: A critique

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  • Kevin Clinton

    ()
    (Queen's University)

Abstract

Core inflation is a useful concept for the theory and practice of monetary policy. The Bank of Canada maintains, in addition, that core inflation should be, and has in fact been, a useful predictor of headline inflation. Under the bank's policy of inflation targeting, however, this is incorrect: over horizons of a year or more the best forecast should be the 2 percent target; and core inflation should have no predictive content. Post-1995 evidence confirms this argument.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1077.pdf
File Function: First version 2006
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1077.

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Length: 10 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:qed:wpaper:1077

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Keywords: TBA;

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References

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  1. Tiff Macklem, 2001. "A New Measure of Core Inflation," Bank of Canada Review, Bank of Canada, vol. 2001(Autumn), pages 3-12.
  2. Svensson, Lars E.O., 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Seminar Papers, Stockholm University, Institute for International Economic Studies 615, Stockholm University, Institute for International Economic Studies.
  3. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Working Papers 06-10, Bank of Canada.
  4. Maral Kichian, 2001. "On the Nature and the Stability of the Canadian Phillips Curve," Working Papers 01-4, Bank of Canada.
  5. Hogan, Seamus & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports, Bank of Canada 89, Bank of Canada.
  6. Nicholas Rowe, 2002. "How to Improve Inflation Targeting at the Bank of Canada," Working Papers 02-23, Bank of Canada.
  7. Frédérick Demers, 2003. "The Canadian Phillips Curve and Regime Shifting," Working Papers 03-32, Bank of Canada.
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Cited by:
  1. William B.P. Robson, 2009. "To the Next Level: From Gold Standard to Inflation Targets - to Price Stability?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 285, March.
  2. Alan K. Detmeister, 2011. "The usefulness of core PCE inflation measures," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2011-56, Board of Governors of the Federal Reserve System (U.S.).
  3. Gregor W. Smith, 2009. "The Missing Links: Better Measures of Inflation and Inflation Expectations in Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 287, April.
  4. Tito Nícias Teixeira da Silva Filho, 2012. "Are Core Inflation Directional Forecasts Informative?," Working Papers Series, Central Bank of Brazil, Research Department 266, Central Bank of Brazil, Research Department.

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