Price-Level versus Inflation Targeting in a Small Open Economy

Gabriel Srour

Staff Working Papers from Bank of Canada

Abstract: This paper compares two types of monetary policy: price-level targeting and inflation targeting. It reviews recent arguments that favour price-level targeting, and examines how certain factors, such as the nature of the shocks affecting the economy and the degree to which agents are forward-looking, bear upon the arguments. The paper then extends the analysis to a small open economy such as Canada's, and considers whether it is practical for this country to pursue price-level targets if its dominant trading partner, the United States, allows the price level to drift.

Keywords: Monetary; policy; framework (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2001
New Economics Papers: this item is included in nep-cba and nep-mac
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:01-24

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