00000nam 2200000za 4500 9.854847 CaOODSP 20221107155147 cr ||||||||||| 180409s2018 oncd ob f000 0 eng d CaOODSP eng eng fre n-cn--- FB3-5/2018-17E-PDF Could a higher inflation target enhance macroeconomic stability? [electronic resource] / by José Dorich ... [et al.]. [Ottawa] : Bank of Canada, 2018. 39 p. : col. charts. Bank of Canada staff working paper, 1701-9397 ; 2018-17 "April 2018." Includes bibliographical references (p. 28-32). “Recent international experience with the effective lower bound on nominal interest rates has rekindled interest in the benefits of inflation targets above 2 per cent. We evaluate whether an increase in the inflation target to 3 or 4 per cent could improve macroeconomic stability in the Canadian economy. We find that the magnitude of the benefits hinges critically on two elements: (i) the availability and effectiveness of unconventional monetary policy (UMP) tools at the effective lower bound and (ii) the level of the real neutral interest rate. In particular, we show that when the real neutral rate is in line with the central tendency of estimates, raising the inflation target yields some improvement in macroeconomic outcomes. There are only modest gains if effective UMP tools are available. In contrast, with a deeply negative real neutral rate, a higher inflation target substantially improves macroeconomic stability regardless of UMP"--Abstract, p. ii. Includes abstract in French. gccst Inflation gccst Monetary policy Econometric models Dorich, José. Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2018-17. (CaOODSP)9.806221 PDF 635 KB https://publications.gc.ca/collections/collection_2018/banque-bank-canada/FB3-5-2018-17-eng.pdf