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How Monetary Policy is made: Two Canadian Tales

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  • Pierre L. Siklos
  • Matthias Neuenkirch

Abstract

We examine policy rate recommendations of the Bank of Canada’s Governing Council (GC) and its shadow, the C.D. Howe Institute’s Monetary Policy Council (MPC). Individual recommendations of the MPC are observed but not those of the GC. Differences in the two committee’s recommendations are small but persistent. The MPC is more responsive to the output gap than its GC counterpart. Both committees respond similarly to inflation. Disagreement within the MPC and with the GC is more likely when rates are rising. Finally, the Bank’s forward guidance had a significant influence on the MPC’s views about the future inflation path.

Suggested Citation

  • Pierre L. Siklos & Matthias Neuenkirch, 2014. "How Monetary Policy is made: Two Canadian Tales," CAMA Working Papers 2014-53, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2014-53
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    Cited by:

    1. Matthias Neuenkirch & Pierre Siklos, 2014. "When is Lift-Off? Evaluating Forward Guidance from the Shadow," Open Economies Review, Springer, vol. 25(5), pages 819-839, November.
    2. Horváth, Roman & Jonášová, Júlia, 2015. "Central banks' voting records, the financial crisis and future monetary policy," European Journal of Political Economy, Elsevier, vol. 38(C), pages 229-243.
    3. Masciandaro, Donato, 2022. "Independence, conservatism, and beyond: Monetary policy, central bank governance and central banker preferences (1981–2021)," Journal of International Money and Finance, Elsevier, vol. 122(C).
    4. Donato Masciandaro, 2021. "Central Bank Governance in Monetary Policy Economics (1981-2020)," BAFFI CAREFIN Working Papers 21153, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    5. Pang, Ke & Shiamptanis, Christos, 2024. "Is the Bank of Canada concerned about inflation or the state of the economy?," Journal of International Money and Finance, Elsevier, vol. 140(C).
    6. Donato Masciandaro, 2021. "Central Bank Governance in Monetary Policy Economics (1981-2020)," BAFFI CAREFIN Working Papers 21153, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    7. Sylvester Eijffinger & Ronald Mahieu & Louis Raes, 2016. "Monetary Policy Committees, Voting Behavior and Ideal Points," BAFFI CAREFIN Working Papers 1628, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other

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