Inflation targeting and monetary policy in Canada: What is the impact on inflation uncertainty?
Inflation uncertainty has been demonstrated both theoretically and empirically to lower real output. This paper examines the impact of inflation targeting in Canada on inflation uncertainty, as well as persistence. Our results indicate that inflation targeting lowered inflation persistence, but actually increased uncertainty. Such an effect may be due to the failure of the previous formal target, the M1 money supply, to successfully combat inflation.
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Volume (Year): 19 (2008)
Issue (Month): 2 (August)
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