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Flexible Inflation Forecast Targeting: Evidence from Canada

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.

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File URL: http://www.uvic.ca/socialsciences/economics/assets/docs/discussion/ddp1101.pdf
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Paper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 1101.

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Length: 39 pages
Date of creation: 30 Nov 2011
Date of revision:
Handle: RePEc:vic:vicddp:1101
Note: ISSN 1914-2838
Contact details of provider: Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
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Web page: http://web.uvic.ca/econ
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