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Getting it Right When You Might Be Wrong: The Choice Between Price-Level and Inflation Targeting

Author

Listed:
  • Jean Boivin

    (HEC Montreal)

Abstract

Canada’s 2 percent inflation targeting program works pretty well – but could targeting the price level work even better, especially when inflation and the price level might not be perfectly observed?

Suggested Citation

  • Jean Boivin, 2009. "Getting it Right When You Might Be Wrong: The Choice Between Price-Level and Inflation Targeting," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 297, September.
    • Handle: RePEc:cdh:commen:297
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    File URL: https://www.cdhowe.org/public-policy-research/getting-it-right-when-you-might-be-wrong-choice-between-price-level-and-inflation-targeting
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    References listed on IDEAS

    as
    1. Lars E. O. Svensson, 1996. "Price Level Targeting vs. Inflation Targeting: A Free Lunch?," NBER Working Papers 5719, National Bureau of Economic Research, Inc.
    2. Ricardo Reis & Mark W. Watson, 2007. "Measuring Changes in the Value of the Numeraire," Working Papers 2007-7, Princeton University. Economics Department..
    3. Steve Ambler, 2009. "Price-Level Targeting and Stabilization Policy: A Review," Bank of Canada Review, Bank of Canada, vol. 2009(Spring), pages 21-31.
    4. Marc P. Giannoni & Jean Boivin, 2005. "DSGE Models in a Data-Rich Environment," Computing in Economics and Finance 2005 431, Society for Computational Economics.
    5. Svensson, Lars E O, 1999. "Price-Level Targeting versus Inflation Targeting: A Free Lunch?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 277-295, August.
    6. Michael Parkin, 2009. "What is the Ideal Monetary Policy Regime? Improving the Bank of Canada's Inflation-targeting Program," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 279, January.
    7. Marc Giannoni & Jean Boivin, 2008. "Optimal Monetary Policy in a Data-Rich Environment," 2008 Meeting Papers 788, Society for Economic Dynamics.
    8. Harvey,Andrew C., 1991. "Forecasting, Structural Time Series Models and the Kalman Filter," Cambridge Books, Cambridge University Press, number 9780521405737.
    9. Jerry Hausman & Ephraim Leibtag, 2009. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Chapters, in: Price Index Concepts and Measurement, pages 203-231, National Bureau of Economic Research, Inc.
    10. 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.
    11. Vestin, David, 2006. "Price-level versus inflation targeting," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1361-1376, October.
    12. Donald Coletti & René Lalonde & Dirk Muir, 2008. "Inflation Targeting and Price-Level-Path Targeting in the GEM: Some Open Economy Considerations," Staff Working Papers 08-6, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Oleksiy Kryvtsov, 2016. "Is there a quality bias in the Canadian CPI? Evidence from microdata," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1401-1424, November.
    2. Philippe Bergevin & William B.P. Robson, 2011. "The Costs of Inflexible Indexing: Avoiding the Adverse Fiscal Impacts of Lower Inflation," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 322, February.
    3. Steven Ambler, 2014. "Price-Level Targeting: A Post-Mortem?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 400, February.
    4. Lawson A.W. Hunter, Q.C. & Edward Iacobucci & Michael J. Trebilcock, 2010. "Scrambled Signals: Canadian Content Policies in a World of Technological Abundance," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 301, January.
    5. Donald N. Dewees, 2010. "The Price Isn't Right: The Need for Reform in Consumer Electricity Pricing," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 124, January.
    6. Colin Busby, 2010. "Supporting Employees who Deploy: The Case for Financial Assistance to Employers of Military Reservists," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 123, January.

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    More about this item

    Keywords

    monetary policy; price-level targeting; inflation targeting; Bank of Canada;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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