Core inflation at the Bank of Canada: A critique

Kevin Clinton

No 1077, Working Papers from Queen's University, Department of Economics

Abstract: Core inflation is a useful concept for the theory and practice of monetary policy. The Bank of Canada maintains, in addition, that core inflation should be, and has in fact been, a useful predictor of headline inflation. Under the bank's policy of inflation targeting, however, this is incorrect: over horizons of a year or more the best forecast should be the 2 percent target; and core inflation should have no predictive content. Post-1995 evidence confirms this argument.

Keywords: TBA (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
Date: 2006-05
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