Suchergebnisse

The origins of central banking, in general, are examined, along with the specific origins of the Bank of Canada. A general policy framework is set out, in terms of goals, policy rules, and implementation, and the Bank of Canada's inflation targeting framework is evaluated. Alternatives to inflation targeting are considered, including price-level targeting, inflation averaging, nominal gross domestic product targeting, and a dual mandate. Monetary policy issues associated with persistent low real interest rates are discussed. The conclusion is that inflation targeting has been a success in Canada, and there are no obviously superior alternative approaches.

A model of public and private liquidity integrates financial intermediation theory with a New Monetarist monetary framework. Non-passive fiscal policy and costs of operating a currency system imply that an optimal policy deviates from the Friedman rule. A liquidity trap can exist in equilibrium away from the Friedman rule, and there exists a permanent nonneutrality of money, driven by an illiquidity effect. Financial frictions can produce a financial-crisis phenomenon that can be mitigated by conventional open market operations working in an unconventional manner. Private asset purchases by the central bank are either irrelevant or they reallocate credit and redistribute income. (JEL E13, E44, E52, E62, G01)