How Monetary Policy Is Made: Two Canadian Tales

Siklos, Pierre L.; Neuenkirch, Matthias

doi:10.2139/ssrn.2470851

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How Monetary Policy Is Made: Two Canadian Tales

CAMA Working Paper No. 53/2014

45 Pages Posted: 25 Jul 2014 Last revised: 28 Jul 2014

See all articles by Pierre L. Siklos

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs ; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Matthias Neuenkirch

University of Trier - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

There are 2 versions of this paper

Date Written: July 2014

Abstract

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 committee’s 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 Classification: E43, E52, E58, E61, E69

Suggested Citation: Suggested Citation

Siklos, Pierre L. and Neuenkirch, Matthias, How Monetary Policy Is Made: Two Canadian Tales (July 2014). CAMA Working Paper No. 53/2014, Available at SSRN: https://ssrn.com/abstract=2470851 or http://dx.doi.org/10.2139/ssrn.2470851