Suchergebnisse

AbstractWe propose a method, based on the currency union model of Galí and Monacelli, to determine whether a region within an existing currency area belongs in the currency union. The method involves assessing the predictability of regional inflation rates at medium term horizons. We apply the method to the Canadian provinces and find that for all but Alberta there is little evidence of costs in terms of inflation arising from national monetary policy. For Alberta, the evidence suggests that they are not as well served by the inflation targeting framework and that a more flexible policy environment might improve inflation outcomes.

AbstractWe test whether the Bank of Canada pursues a flexible inflation forecast target, one that weights output growth as well as inflation. For the period 1996–2007, we find evidence that the Bank did effectively pursue such a target over the forecast horizon of 12 to 18 months. We find the relative weight that the Bank gives to output growth in its target to be positive and statistically significant within the range of 0.2 to 0.4.