This paper reviews the existing theoretical and empirical literature addressing the benefits of low inflation. The ultimate goal is to arrive at a set of benefits in which a monetary authority can have genuine confidence. I argue that the current state of economic research—both empirical and...

This article provides answers to several key questions about Canadian monetary policy. First, what is monetary policy? Second, why does the Bank of Canada focus on the control of inflation rather than other macroeconomic variables? Third, how do the Bank's actions influence the rate of...

The monetary policy arrangement in Canada has proven very successful. Despite many and varied economic shocks, the Bank of Canada has established the necessary conditions under which the annual rate of inflation, as measured by the rate of change of the Consumer Price Index, has remained very...

This paper empirically examines the view that wage rigidity in long-term labor contracts matters for the behavior of employment. In particular, I follow Bils's (1991) approach, which looks for systematic employment patterns in the first year of long-term contracts. Using a new panel data set...

This paper models a union and firm choosing between long labor contracts, in which wages are predetermined, and short contracts, in which wages are flexible. It is shown that the union strictly prefers short contracts because it dislikes the greater employment volatility in long contracts. In...