Comparative Analysis of the Implementation of the Inflation Targeting Monetary Strategy in Canada and New Zealand

Stevanović Suzana () and Milenković Ivan ()
Additional contact information
Stevanović Suzana: Faculty of Business Economics Bijeljina, University of East Sarajevo, Bosnia and Herzegovina
Milenković Ivan: Faculty of Economics in Subotica, University of Novi Sad, Republic of Serbia

Economic Themes, 2020, vol. 58, issue 3, 401-414

Abstract: Since the 1990s there have been major changes in the way monetary policy is conducted. Since other monetary strategies did not result in the desired outcome, the first concept of inflation targeting was presented in New Zealand (1990), then in Canada (1991), England (1992), Sweden and Finland (1993), Australia and Spain (1994), Israel, Chile, Brasil, the Czech Republic, Poland, Hungary, Serbia and other countries. Thus, the application of this monetary regime has spread from economically developed to developing countries. This article examines the adoption, the formal framework for inflation targeting and the experience of the two countries that were leaders in the adoption of this modern strategy, New Zealand and Canada. At the time of the announcement of the inflation targets, inflation in both countries was around 6%. However, there are differences regarding the time frame. So, in New Zealand in a shorter period of time, credibility should have been achieved regarding the imbalance of monetary and fiscal policy. While, on the other hand, a longer time frame is envisaged for the Central Bank of Canada regarding achieving greater flexibility to mitigate price shocks. After all the above, it can be concluded that both observed countries (Canada and New Zealand) during the period 2008-2017, achieved positive effects from inflation targeting. In this sense inflation rates in the target range of 1-3% were achieved, except for a few years after the financial crisis (2008-2011), but after certain revisions of the formal framework, both countries successfully fought for greater economic growth and financial stability. The inflation targeting regime proved to be very successful in achieving the set targets, so both Central Banks continued to constantly update the formal and informal inflation targeting frameworks, in order to continuously achieve the expected effects.

Keywords: Monetary regime of inflation targeting; Inflation rates; Consumer price index (search for similar items in EconPapers)
JEL-codes: E42 E44 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/ethemes-2020-0023 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecothe:v:58:y:2020:i:3:p:401-414:n:7

DOI: 10.2478/ethemes-2020-0023

Access Statistics for this article

Economic Themes is currently edited by Marija Radosavljević

More articles in Economic Themes from Sciendo
Bibliographic data for series maintained by Peter Golla ().