Suchergebnisse

The debate about Canadian-U.S. monetary integration is surveyed. The choice is among overall monetary orders,rather than exchange rate regimes and questions of policy credibility and political accountability are crucial. Canada's recent economic performance under inflation targets, and arguments that the flexible exchange rate has undermined real economic performance are assessed. The most economically attractive among alternative monetary orders, the adoption by Canada of the US dollar with provision for meaningful Canadian input into policy decisions and supervision of the financial system - is not politically attainable. Intermediate arrangements are unattractive and clearly inferior to Canada's current monetary order.

In a model with forward-looking expectations, the paper examines communication of central bank forecasts when the inflation target is subject to unobserved changes. It characterizes the effect of disclosure of forecasts on inflation and output stabilization and the choice of an active versus passive monetary policy. The paper shows that these choices depend on the slope of the Phillips curve, the central bank's preference weight on inflation relative to output and the ratio of the variability of the inflation target relative to the cost-push disturbance. The paper briefly discusses how disclosure of forecasts may be beneficial for a society that is more concerned about inflation stabilization than the central bank.