Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80798
Authors: 
Coletti, Don
Lalonde, René
Masson, Paul
Muir, Dirk
Snudden, Stephen
Year of Publication: 
2012
Series/Report no.: 
Bank of Canada Working Paper 2012-16
Abstract: 
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 commodities can play a key role in affecting the relative merits of the alternative monetary policy frameworks. In particular, large real adjustment costs in energy supply and demand induce highly persistent cost-push pressures in the economy leading to a significant deterioration in the inflation - output gap trade-off available to central banks, particularly to those pursuing price level targeting.
Subjects: 
Economic models
Inflation and prices
International topics
Monetary policy framework
JEL: 
E17
E31
E37
E52
F41
Q43
Document Type: 
Working Paper

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