Canada"s experience with inflation targets and a flexible exchange rate : lessons learned = Cibles d"inflation et régime de changes flottants : les enseignements tirés de l"expérience canadienne by David A. Dodge

Cover of: Canada

Published by Bank of Canada = Banque du Canada in Ottawa, Ont .

Written in English

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Subjects:

  • Monetary policy -- Canada.,
  • Inflation (Finance) -- Canada.,
  • Foreign exchange rates -- Canada.,
  • Politique monétaire -- Canada.,
  • Inflation -- Canada.,
  • Taux de change -- Canada.,
  • Canada -- Economic conditions -- 20th century.,
  • Canada -- Conditions économiques -- 20e siècle.

Edition Notes

Book details

Statementremarks by David Dodge to the Canadian Society of New York, New York City, N.Y. = allocution prononcée par David Dodge devant la Canadian Society of New York, New York, N.Y.
ContributionsBank of Canada., Banque du Canada.
The Physical Object
Pagination8, 9 p.
ID Numbers
Open LibraryOL22134879M

Download Canada"s experience with inflation targets and a flexible exchange rate : lessons learned =

Canada’s Pioneering Experience with a Flexible Exchange Rate in the s: (Hard) Lessons Learned for Monetary Policy in a Small Open Economy by Michael Bordo1, Ali Dib2, and Lawrence Schembri2 1Department of Economics Rutgers University 2International Department Bank of Canada Ottawa, Ontario, Canada K1A 0G9 [email protected] by: 8.

In a speech to the Canadian Society of New York, Bank of Canada Governor David Dodge said today that Canada's monetary policy framework, based on an Canadas experience with inflation targets and a flexible exchange rate : lessons learned = book inflation-control target and a flexible exchange rate, "has contributed importantly to putting the Canadian economy back on the right path to longer-term prosperity.".

It examines whether the floating rate was the best option for Canada in the s by developing and estimating a New Keynesian small open economy model of the Canadian economy. Canada's Pioneering Experience with a Flexible Exchange Rate in the s: (Hard) Lessons Learned for Monetary Policy in a Small Open Economy - Bank of CanadaCited by: 8.

"The inflation target and a floating exchange rate work well together—indeed they reinforce each other. This approach has worked extraordinarily well for us over the last decade." — Governor David Dodge, Canada's Experience with Inflation Targets and a Flexible Exchange Rate: Lessons Learned.

Importantly, Canada also maintains a flexible exchange rate, which is essential to maintaining low and stable inflation domestically, regardless of developments abroad.

Our vision. Given this backdrop, a veritable smorgasbord of work will be going on at the Bank in But let me focus on four areas.

Inflation-target renewalAuthor: Stephen S Poloz. Downloadable. This paper provides an introduction to inflation targeting, with a particular emphasis on analytical issues and the recent experience of developing countries. After presenting a formal framework, it discusses basic requirements for inflation targeting and how such a regime differs from money and exchange rate targeting regimes.

1 Rose () finds that the monetary policy frameworks consisting of an inflation target and a flexible exchange rate have been the most stable since the global financial crisis.

He also finds this combination has proven to be a very durable framework overall because no country has yet to abandon it under duress. 2 The Bank of Canada has undertaken extensive work to model the Canadian dollar.

quite flexible in practice. The target ranges for money growth were missed on the order of fifty percent of the time in Germany, often because the Bundesbank's concern about other objectives, including output and exchange rates.6 Furthermore, the Bundesbank demonstrated its flexibility by allowing its inflation goal to vary over time and to.

Foreign exchange intervention is widely used as a policy tool, particularly in emerging markets, but many facets of this tool remain limited, especially in the context of flexible exchange rate regimes.

The Latin American experience can be informative because some of its largest countries adopted floating exchange rate regimes and inflation targeting while continuing to intervene in foreign. Inflation targets can increase the central bank's flexibility in responding to declines in aggregate spending.

Declines in aggregate _____ that cause the inflation rate to fall below the floor of the target range will automatically stimulate the central bank to _____ monetary policy without fearing that this action will trigger a rise in inflation expectations. ings for EMEs and, in particular, on our own experience at the Banco Central do Brasil (BCB), besides the use of simulations of a model to guide our discussions.

In a way, because the case of Brazil represents the first stress test of an inflation-targeting regime, the lessons learned may some-day be useful for other countries. Starting in the early s, several emerging market and transition economies adopted inflation targeting (IT).

In this paper we discuss a number of issues that arise in this context: (a) the definition of IT, (b) the role of preconditions for IT, (c) the use of intermediate exchange rate targets, and (d) the specification of inflation targets.

and its collapse in the face of U.S.-induced inflation. Finally, section summarizes the main points of the paper, discusses some lessons learned from the Bretton Woods experience for the design of a fixed exchange rate regime, and raises questions answered by the other papers in the conference volume.

Furthermore, inflation targeting has anchored inflation expectations (Walsh, ) and lowered inflation persistence (Mishkin, ).

14 Fixed exchange rate regimes have, in some cases, been. The themes of this study are the exchange rate regimes chosen by policy makers in the twentieth century, the means used to maintain these regimes, and the impact of these decisions on individual national economies and the world economy in general.

The book draws heavily on new research showing the lessons and the legacy left for policy makers by the gold standard and the attempt at its. Downloadable. 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. Early to mids. The initial inflation target of percent originated primarily as a communications device – a way for Minister Roger Douglas to refocus expectations and convince the public that the anti-inflation drive would continue (Reddell, ).

13 Inflation was within the target byand stayed there until June when adverse weather pushed up the prices of fruit and. The move from exchange rate targeting to inflation targeting. The series of emerging market currency crises that began in December and ended in January all involved the abandonment of exchange rate targets in favor of more flexible currency regimes, if not.

This book provides the first in depth analysis of the European Monetary System (EMS), the only lasting experiment of this kind. Events of recent years have exacerbated the dissatisfaction with the performance of flexible exchange rates, and prompted a number of proposals to limit exchange rate fluctuations among industrialized countries.

Bank of Canada opens discussions on inflation target. Bank of Canada opens discussions on inflation target. Make Kitco Your Homepage. the lessons learned from experience in Canada and elsewhere, and advances in academic research," Schembri said in opening remarks.

which also includes a flexible exchange rate, to consider. Janu Raising the Inflation Target: Lessons from Japan.

Taisuke Nakata 1. Introduction. Equilibrium real interest rates across the world, including in the United States, have declined over the past few decades and are expected to stay at low levels going forward. 2 All else equal, lower equilibrium real interest rates imply that the policy rate will be constrained by the.

"Flexible Exchange Rates and Interdependence," with Hooke (ed.), Exchange Rate Regimes and Policy Interdependence, IMF, l and Staff Papers, March "Exchange Rate Determination: Comments on Mussa," in R.

Marston and J Bilson (eds.) Flexible Exchange Rates, University of Chicago Press,   UPDATE 1-Bank of Canada opens discussions on inflation target. the lessons learned from experience in Canada and elsewhere, and advances in academic research," Schembri said in opening remarks.

which also includes a flexible exchange rate, to consider dimensions well beyond the relatively narrow scope of the joint inflation-control. Flexible exchange rates and inflation. Critics argue that a nation with flexible exchange rates can ‘import’ inflation from other nations, which negate real income gains made through domestic expansionary policy.

In other words, this is a revised version of the ‘balance of payments constraint’ on growth. Which Target for Exchange Rate Policy in Developing Countries: Stability or Competitiveness Issues and Some Evidence, in: Ciaassen, E.-M./Salin, P. (eds.), Recent Issues in the Theory of Flexible Exchange Rates, Amsterdam, pp.

3–27 Google Exchange Rate Based Stabilization — Lessons from a Radical Implementation in Argentina, in: The. for monetary policy that can be drawn from the experience of the s and s.

(I) Monetary policy should take a longer-term perspective and focus on one or more nominal quantity variables or the nominal exchange rate, and not on real variables or interest rates.

(2) Inflation expectations become entrenched over time and very. Suppose that the country Argonia follows a flexible exchange rate regime.

The exchange rate between the Argonian dollar (AGD) and the U.S. dollar (USD) is currently 1 AGD = 5 USD. Use the graph on the right to show the equilibrium in the foreign exchange market. Now, the Chinses government is slowly transitioning to a flexible exchange rate.

That means it changes less frequently than a flexible exchange rate, but more frequently than a fixed exchange rate.

As of Ap$1 U.S. dollar was worth about Chinese yuan. Since Februarythe U.S. dollar has weakened against the yuan. 1 See Bernanke, Laubach, Mishkin and Posen, Inflation Targeting: Lessons from the International Experience, Princeton University Press, for a comprehensive overview of the issues and a summary of the literature.

Debelle, "Inflation Targeting in Practice" (WP/97/35) also reviews the experience of industrial economies drawing partly on the (early) research on those countries done at. The proposed policy is based on relative inflation forecast targeting and incorporates an ancillary target of declining exchange rate risk, which is suggested as a key criterion for evaluating the.

Febru Monetary Policy Strategies and Tools When Inflation and Interest Rates Are Low. Governor Lael Brainard. At the U.S. Monetary Policy Forum, sponsored by the Initiative on Global Markets at the University of Chicago Booth School of Business, New York, New York.

1Current monetary arrangements entail a fiat money, flexible exchange rate regime. 2This goal has been explicitly endorsed by a number of Federal Reserve officials including several Federal Reserve Bank Presidents.

LESSONS FROM INFLATION TARGETING EXPERIENCE I. INTRODUCTION W hile some forward-looking U.S. Congressmen have promoted price stability and introduced. Stanford economist John B. Taylor on inflation targets, exchange rates and the eponymous rule. most people who've looked at the results of models with flexible exchange rates have found that there's not much of a reaction to the exchange rate in the optimal policy.

Japan, and Canada—in bringing this about, as you say, through. based on two key elements: a flexible exchange rate and inflation-control targets. As we will see, monetary policy plays a key role in our model in helping the Canadian economy adjust to shocks. In particular, our scenario assumes that central banks play an active role.

The numerical inflation target is typically around two per cent at an annual rate for the Consumer Price Index (CPI) or a core CPI, in the form of a range, such as one to three per cent in New Zealand; or a point target with a range, such as a two per cent point target with a range/tolerance interval of plus/minus one percentage points in.

A central bank will be concerned about the exchange rate for multiple reasons: (1) Movements in the exchange rate will affect the quantity of aggregate demand in an economy; (2) frequent substantial fluctuations in the exchange rate can disrupt international trade and cause problems in a nation’s banking system–this may contribute to an unsustainable balance of trade and large inflows of.

The adoption of IT is associated with flexible exchange rates to avoid a conflict between the exchange rate target and the inflation target. Several studies (Hu ; Lin and Ye; Lucotte ; Mukherjee and Singer ) report that countries with a floating exchange rate regime are more likely to adopt IT.

the switch from fixed to flexible exchange rates. Although flexible rates may help to explain high inflation rates in the s, it is much more difficult to tie growth rates, unemployment rates, or productivity performance to a nominal variable like the exchange rate.

Nor is it easy tosay how the fixed. Finally, any exchange-rate regime, and especially one of flexible rates, requires comple-mentary policies to increase its chances of success. In this context, some have suggested the use of capital controls; less controversial is the need for prudential regulation of the financial system and for counter-cyclical fiscal policy.

After Australia floated its currency exchange rate init gradually changed its entire approach to monetary policy. Controlling domestic inflation had already become the government’s principal objective, but during the s the approach to that goal shifted from Australia’s external financial relationships to its domestic financial conditions.

Using book and chapter pages; Using Research Literature Reviews; Elgaronline User Help Videos - Spanish; Purchase Options.

Major subject collections; Encyclopedia of Private International Law; Encyclopedia of Law and Economics, 2nd Edition; Elgar Encyclopedia of Environmental Law; Elgar Encyclopedia of International Economic Law; Subject.monetary policy issues for open economies, including: policy rules for open economies, choice of exchange rate regime (flexible exchange rates, managed exchange rates and target zones, currency boards, dollarization, monetary union), international monetary policy coordination; political economy models of inflation and monetary policymaking.s.

Compared with the recent period of flexible exchange rates, therefore, the s appear to have been a golden era of economic performance. Yet we should hesitate before attributing recent economic perfor­ mance to the switch from fixed to flexible exchange rates.

Although flexible rates may help to explain high inflation rates in the.

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