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Flexible Inflation Forecast Targeting: Evidence from Canada

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Abstract

We examine models of flexible inflation forecast targeting. The target criteria from these models restrict the conditionally expected paths of inflation and output targeted by the central bank. We estimate and test these criteria for Canada, an early adopter of inflation targeting. We show that the Bank of Canada systematically balances inflation and economic activity over the medium term policy horizon consistent with flexible inflation targeting. Further, our results establish the usefulness of flexible inflation targeting rules as an alternative to standard Taylor rules.

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File URL: http://www.uvic.ca/socialsciences/economics/assets/docs/discussion/ddp1101.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 1101.

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Length: 39 pages
Date of creation: 30 Nov 2011
Date of revision:
Handle: RePEc:vic:vicddp:1101

Note: ISSN 1914-2838
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Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
Phone: (250)721-6197
Fax: (250)721-6214
Web page: http://web.uvic.ca/econ
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Keywords: monetary policy; inflation; flexible inflation targeting;

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References

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Cited by:
  1. Graham M. Voss & M. Chaban, 2012. "National and Provincial Inflation in Canada: Experiences under Inflation Targeting," Department Discussion Papers, Department of Economics, University of Victoria 1201, Department of Economics, University of Victoria.

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