January 2015 issue contents
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