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The Role of Economic Projections in Canadian Monetary Policy Formulation

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  • Pierre Duguay
  • Stephen Poloz

Abstract

This paper describes the economic aspects of the monetary policy formulation process in Canada. It begins by outlining how the objectives of policy mesh with the mainstream view of how the economy functions. A key implication of this framework is that policy formulation must be forward-looking. The discussion then turns to the role played by economic projections in the policy process, and how the staff at the Bank of Canada develop those projections and monitor the economy. The paper concludes with a description of how unforseen developments are incorporated into the projections, and how those updates are translated by the staff into a revised set of policy options for the consideration of senior management.

Suggested Citation

  • Pierre Duguay & Stephen Poloz, 1994. "The Role of Economic Projections in Canadian Monetary Policy Formulation," Canadian Public Policy, University of Toronto Press, vol. 20(2), pages 189-199, June.
    • Handle: RePEc:cpp:issued:v:20:y:1994:i:2:p:189-199
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    Citations

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    Cited by:

    1. David Laidler & William B.P. Robson, 2004. "Two Percent Target: The Context, Theory, and Practice of Canadian Monetary Policy since 1991," C.D. Howe Institute Policy Studies, C.D. Howe Institute, number 20041, January.
    2. Paul Jenkins & Brian O'Reilly, 2001. "Monetary Policy and the Economic Well-being of Canadians," The Review of Economic Performance and Social Progress, in: Andrew Sharpe, Executive Director & France St-Hilaire, Vice-President , Research & Keith Banting, Di (ed.), The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s, volume 1, Centre for the Study of Living Standards;The Institutute for Research on Public Policy.
    3. Daniel Racette & Jacques Raynauld, 1994. "Canadian Monetary Policy 1989-1993: What Were the Bank of Canada's True Actions in the Determination of Monetary Conditions?," Canadian Public Policy, University of Toronto Press, vol. 20(4), pages 365-384, December.
    4. Leo Butler, 1996. "The Bank of Canada's New Quarterly Porjection Model Part 4 : A Semi- Structural Method to Estimate Potential Output : Combining Economic Theory with a Time-Series Filter," Technical Reports 77, Bank of Canada.
    5. Champagne, Julien & Sekkel, Rodrigo, 2018. "Changes in monetary regimes and the identification of monetary policy shocks: Narrative evidence from Canada," Journal of Monetary Economics, Elsevier, vol. 99(C), pages 72-87.
    6. George A. Kahn & Klara Parrish, 1998. "Conducting monetary policy with inflation targets," Economic Review, Federal Reserve Bank of Kansas City, vol. 83(Q III), pages 5-32.
    7. Denise Côté & Doug Hostland, 1996. "An Econometric Examination of the Trend Unemployment Rate in Canada," Staff Working Papers 96-7, Bank of Canada.
    8. Bruce Montador, 1995. "The Implications of Monetary Policy in Canada," Canadian Public Policy, University of Toronto Press, vol. 21(1), pages 107-120, March.
    9. Duguay, Pierre & Longworth, David, 1998. "Macroeconomic models and policy making at the bank of canada," Economic Modelling, Elsevier, vol. 15(3), pages 357-375, July.
    10. Ben Fung & Rohit Gupta, "undated". "Searching for the Liquidity Effect in Canada," Staff Working Papers 94-12, Bank of Canada.
    11. Sharon Kozicki, 1999. "How useful are Taylor rules for monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, vol. 84(Q II), pages 5-33.
    12. Benjamin Hunt, 1995. "The effect of foreign demand shocks on the Canadian economy: An analysis using QPM," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 23-32.
    13. Tao Zha, 1997. "Identifying monetary policy: a primer," Economic Review, Federal Reserve Bank of Atlanta, vol. 82(Q 2), pages 26-43.
    14. David Longworth & Brian O´Reilly, 2002. "The Monetary Policy Transmission Mechanism and Policy Rules in Canada," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.),Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 13, pages 357-392, Central Bank of Chile.

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