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Core inflation at the Bank of Canada A critique

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  • Clinton, Kevin

Abstract

Core inflation is a useful concept for the theory and practice of monetary policy. The Bank of Canada maintains, in addition, that core inflation should be, and has in fact been, a useful predictor of headline inflation. Under the bank’s policy of inflation targeting, however, this is incorrect: over horizons of a year or more the best forecast should be the 2 percent target; and core inflation should have no predictive content. Post- 1995 evidence confirms this argument.

Suggested Citation

  • Clinton, Kevin, 2006. "Core inflation at the Bank of Canada A critique," Queen's Economics Department Working Papers 273553, Queen's University - Department of Economics.
    • Handle: RePEc:ags:quedwp:273553
    DOI: 10.22004/ag.econ.273553
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    References listed on IDEAS

    as
    1. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Staff Working Papers 06-10, Bank of Canada.
    2. Maral Kichian, 2001. "On the Nature and the Stability of the Canadian Phillips Curve," Staff Working Papers 01-4, Bank of Canada.
    3. Frédérick Demers, 2003. "The Canadian Phillips Curve and Regime Shifting," Staff Working Papers 03-32, Bank of Canada.
    4. Thérèse Laflèche & Jamie Armour, 2006. "Evaluating Measures of Core Inflation," Bank of Canada Review, Bank of Canada, vol. 2006(Summer), pages 19-29.
    5. Tiff Macklem, 2001. "A New Measure of Core Inflation," Bank of Canada Review, Bank of Canada, vol. 2001(Autumn), pages 3-12.
    6. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
    7. Nicholas Rowe, 2002. "How to Improve Inflation Targeting at the Bank of Canada," Staff Working Papers 02-23, Bank of Canada.
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