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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
    as

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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. Reis, Ricardo & Watson, Mark W., 2007. "Measuring changes in the value of the numeraire," Kiel Working Papers 1364, Kiel Institute for the World Economy (IfW).
    2. Steve Ambler, 2009. "Price-Level Targeting and Stabilization Policy: A Review," Bank of Canada Review, Bank of Canada, vol. 2009(Spring), pages 21-31.
    3. Marc P. Giannoni & Jean Boivin, 2005. "DSGE Models in a Data-Rich Environment," Computing in Economics and Finance 2005 431, Society for Computational Economics.
    4. 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.
    5. 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.
    6. Marc Giannoni & Jean Boivin, 2008. "Optimal Monetary Policy in a Data-Rich Environment," 2008 Meeting Papers 788, Society for Economic Dynamics.
    7. 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.
    8. 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.
    9. Vestin, David, 2006. "Price-level versus inflation targeting," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1361-1376, October.
    10. 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. 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.
    2. 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.
    3. 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.

    More about this item

    Keywords

    monetary policy; price-level targeting; inflation targeting; Bank of Canada;

    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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