Bank of Canada paper compares price-level and inflation targets

bankofcanada

A working paper, published by the Bank of Canada in June, studies how permanent commodity price shocks impact on the effectiveness of inflation and price-level targets.

Authors Don Coletti, René Lalonde, Paul Masson, Dirk Muir and Stephen Snudden use the Bank of Canada's Global Economy Model to study the transmission of commodity shocks. The researchers find that when energy shocks in particular are highly persistent or permanent, price-level targeting regimes are inferior to inflation targets

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