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National and Provincial Inflation in Canada: Experiences under Inflation Targeting

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We examine the behaviour of national and provincial inflation in Canada under inflation targeting to determine the extent to which the inflation targeting regime adopted by the Bank of Canada in the 1990s has anchored inflation expectations. Inflation expectations are well anchored when there are no predictable departures of inflation from target at sufficiently distant horizons. To examine this condition, we consider the out of sample prediction of monthly inflation with specific focus on whether deviations from the 1-3% target band are consistently predictable. We find support for well anchored inflation expectations at the national level and some but not all provinces.

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Bibliographic Info

Paper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 1201.

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Length: 34 pages
Date of creation: 13 Apr 2012
Date of revision:
Handle: RePEc:vic:vicddp:1201

Note: ISSN 1914-2838
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Keywords: Inflation; monetary policy; inflation targeting; forecasting;

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  7. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics, Boston College Department of Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  8. Kenneth D. West & Whitney K. Newey, 1995. "Automatic Lag Selection in Covariance Matrix Estimation," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0144, National Bureau of Economic Research, Inc.
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