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Flexible Inflation Forecast Targeting: Evidence from Canada

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Abstract

We examine models of flexible inflation forecast targeting. The target criteria from these models restrict the conditionally expected paths of inflation and output targeted by the central bank. We estimate and test these criteria for Canada, an early adopter of inflation targeting. We show that the Bank of Canada systematically balances inflation and economic activity over the medium term policy horizon consistent with flexible inflation targeting. Further, our results establish the usefulness of flexible inflation targeting rules as an alternative to standard Taylor rules.

Suggested Citation

  • Graham M. Voss & Glenn D. Otto, 2011. "Flexible Inflation Forecast Targeting: Evidence from Canada," Department Discussion Papers 1101, Department of Economics, University of Victoria.
  • Handle: RePEc:vic:vicddp:1101
    Note: ISSN 1914-2838
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    Cited by:

    1. Graham M. Voss & M. Chaban, 2012. "National and Provincial Inflation in Canada: Experiences under Inflation Targeting," Department Discussion Papers 1201, Department of Economics, University of Victoria.

    More about this item

    Keywords

    monetary policy; inflation; flexible inflation targeting;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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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