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Interactions among Economic Ideas, Policies and Experience: the Establishment of Inflation Targeting in Canada, 1991-2001

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  • David Laidler

    (University of Western Ontario)

Abstract

"In Canada, targeting the inflation rate was intended as a temporary measure during a transition to price-level stability, but became a well-established monetary policy regime in its own right. This paper analyses the role of the interaction of economic ideas with the experience generated by their application to policy in bringing about this outcome. In the following account, changing beliefs about the stability or otherwise of ongoing inflation, the capacity of a flexible exchange rate to create a vicious circle of depreciation and rising domestic prices, are emphasised, while ideas about the natural unemployment rate and money growth in influencing economic outcomes are also discussed. Today’s standard theoretical approach to modelling inflation targeting arrived on the scene only as the Canadian regime was becoming well established."

Suggested Citation

  • David Laidler, 2020. "Interactions among Economic Ideas, Policies and Experience: the Establishment of Inflation Targeting in Canada, 1991-2001," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 12(2), pages 133-165, July.
    • Handle: RePEc:ren:journl:v:12:y:2020:i:2:p:133-165
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    File URL: https://openjournals.uwaterloo.ca/index.php/rofea/article/view/1693/2044
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    Cited by:

    1. Michael D. Bordo & Pierre Siklos, 2024. "The Importance of Sound Monetary Policy: Some Lessons for Today from Canada’s Experience with Floating Exchange Rates since 1950," Working Papers 320, Princeton University, Department of Economics, Center for Economic Policy Studies..

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