How to Improve Inflation Targeting in Canada
Electronic Access:
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Summary:
Routine publication of the forecast path for the policy interest rate (i.e. “conventional forward guidance”) would improve the transparency of monetary policy. It would also improve policy effectiveness through its influence on expectations, particularly when there is a risk of low inflation, and the policy rate is constrained by the effective lower bound. Model simulations indicate that a potent macroeconomic strategy, for returning the Canadian economy to potential, combines conventional forward guidance with a fiscal stimulus. As a response to the effective lower bound constraint, and the decline in the world equilibrium real interest rate, this strategy is preferable to raising the inflation target.
Series:
Working Paper No. 2016/192
Subject:
Banking Central bank policy rate Financial services Inflation Inflation targeting Monetary policy Output gap Prices Production Real interest rates
English
Publication Date:
September 26, 2016
ISBN/ISSN:
9781475541298/1018-5941
Stock No:
WPIEA2016192
Pages:
43
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