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Canadian Monetary Policy: Will the Checklist Approach Ever Get Us to Price Stability?


  • Daniel Racette
  • Jacques Raynauld


The purpose of this paper is to investigate whether the checklist approach that the Bank of Canada has followed in one way or another over the last two decades is likely to lead us to the stated objective of price stability. The analysis of Canadian monetary policy is performed through the estimation of a Bayesian VAR model of a set of important Canadian macroeconomic variables in their international context. To estimate the model the authors borrowed form C. Sims (1989), but they also transposed his methodology to take into account Canadian features. The results suggest that the exchange rate has been high on the checklist of the Bank of Canada over the years and that, rather, the Bank should concentrate its attention on (broad) monetary aggregates if it really wants to deliver price stability.

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  • Daniel Racette & Jacques Raynauld, 1992. "Canadian Monetary Policy: Will the Checklist Approach Ever Get Us to Price Stability?," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 819-838, November.
  • Handle: RePEc:cje:issued:v:25:y:1992:i:4:p:819-38

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    References listed on IDEAS

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    Cited by:

    1. Zha, Tao, 1999. "Block recursion and structural vector autoregressions," Journal of Econometrics, Elsevier, vol. 90(2), pages 291-316, June.
    2. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August.
    3. Tao Zha, 1996. "Identification, vector autoregression, and block recursion," FRB Atlanta Working Paper 96-8, Federal Reserve Bank of Atlanta.
    4. Ronald H. Lange, 2013. "Monetary policy reactions and the exchange rate: a regime-switching structural VAR for Canada," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(5), pages 612-632, September.
    5. Apergis, Nicholas, 1998. "Inflation and Uncertainty: Does the EMS Participation Play Any Role?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 586-605.
    6. repec:eee:intfor:v:33:y:2017:i:3:p:627-651 is not listed on IDEAS
    7. Capistrán Carlos & Chiquiar Daniel & Hernández Juan R., 2017. "Identifying Dornbusch's Exchange Rate Overshooting with Structural VECs: Evidence from Mexico," Working Papers 2017-11, Banco de México.
    8. Julien Champagne & Rodrigo Sekkel, 2017. "Changes in Monetary Regimes and the Identification of Monetary Policy Shocks: Narrative Evidence from Canada," Staff Working Papers 17-39, Bank of Canada.

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