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Declining Inflation Persistence in Canada: Causes and Consequences

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The persistence of both core and total consumer price index inflation in Canada has declined significantly since the 1980s. In addition to providing up-to-date estimates of inflation persistence, this article examines possible reasons for the decline suggested in the literature. The role played by monetary policy, through its effect on price- and wage-setting behaviour, is distinguished from possible changes to the structure of the economy that are independent of monetary policy. The authors also discuss the implications for monetary policy of low structural persistence in inflation, including the choice of an inflation-targeting regime versus a price-level-targeting regime.

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  • Rhys R. Mendes & Stephen Murchison, 2009. "Declining Inflation Persistence in Canada: Causes and Consequences," Bank of Canada Review, Bank of Canada, vol. 2009(Winter), pages 5-18.
    • Handle: RePEc:bca:bcarev:v:2010:y:2010:i:winter09-10:p:5-18
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    Cited by:

    1. Champagne, Julien & Sekkel, Rodrigo, 2018. "Changes in monetary regimes and the identification of monetary policy shocks: Narrative evidence from Canada," Journal of Monetary Economics, Elsevier, vol. 99(C), pages 72-87.
    2. Monica Jain, 2019. "Perceived Inflation Persistence," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(1), pages 110-120, January.
    3. Rhys Mendes, 2013. "Understanding commodity price cycles in emerging Asia and their implications for monetary policy," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and inflation dynamics in Asia and the Pacific, volume 70, pages 67-69, Bank for International Settlements.
    4. Olivier Gervais & Marc-André Gosselin, 2014. "Analyzing and Forecasting the Canadian Economy through the LENS Model," Technical Reports 102, Bank of Canada.

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