How Monetary Policy Is Made: Two Canadian Tales
by Pierre L. Siklosa and Matthias Neuenkirchb
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 committees’ 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.
JEL Codes: E43, E52, E58, E61, E69.
Full article (PDF, 26 pages, 635 kb)
a Wilfrid Laurier University and Balsillie School of International Affairs
b University of Trier