We examine the relative ability of simple inflation targeting (IT) and price level targeting (PLT) monetary policy rules to minimize both inflation variability and business cycle fluctuations in Canada for shocks that have important consequences for global commodity prices. We find that...

The Survey of Professional Forecasters (SPF) has had vast influence on research related to better understanding expectation formation and the behaviour of macroeconomic agents. Inflation expectations, in particular, have received a great deal of attention, since they play a crucial role in...

We assess the implications of price indexation for estimated frequency of price adjustment in sticky price models of business cycles. These models predominantly assume that non-reoptimized prices are indexed to lagged or average inflation. The assumption of price indexation adds tractability...

Postulating two different specifications for the Canadian Phillips curve (a purely backwardlooking model, and a partly backward-, partly forward-looking model), the authors test for structural breaks in the parameters of the equation. In each case, they account for the possibilities that: (i)...

When there is uncertainty about estimates of the margin of unused capacity in the economy, examining a range of inflation indicators may help in assessing the balance of risks regarding the outlook for inflation. This paper tests a wide range of observable variables for their leading-indicator...

The authors apply existing inflation models that have worked well in industrialized countries to Mexico, an emerging market that has recently moved to adopt an inflation-targeting framework for monetary policy. They compare the performance of these models with a mark-up model that has been used...

A vector error-correction Model (VECM) that Forecasts inflation between the current quarter and eight quarters ahead is found to privide significant leading information about inflation. The model focusses on th effects of deviations of M1 from its long-run demand but also includes, among other...

Macroeconomists have traditionally ignored the behavior of temporary price markdowns (“sales”) by retailers. Although sales are common in the micro price data, they are assumed to be unrelated to macroeconomic phenomena and generally filtered out. We challenge this view. First, using the...

Using the Bank of Canada's main projection and policy-analysis model, ToTEM, this paper measures the welfare gains of switching from inflation targeting to price-level targeting under imperfect credibility. Following the policy change, private agents assign a probability to the event that the...

This paper empirically investigates the possibility that the effects of shocks to output depend on the level of inflation. The analysis extends Elwood’s (1998) framework by incorporating in the model an inflation-threshold process that can potentially influence the stochastic properties of...