We need to rethink Canadian monetary policy?

An excellent post with worthwhile Canadian initiative-rethinking Canadian macroeconomic policy. A good read even if you're not Canadian. More interesting is the proposal for the Bank of Canada to raise the inflation target of 2% to 4%. I am skeptical of our ability to long-term inflation, but during the period of one year or so we will certainly succeed.

I do not believe a higher inflation rate will cause too many economic problems, where the Bank of Canada could hold steady between 3 and 5% reserved. I do not suppose that the problem of cost menu is much more of a problem at 4% instead of 2%. There will be some distributive consequences-the Bank of Canada will earn more in seignorage, will lose people with fixed incomes, the depreciation of the Canadian dollar (assuming our trading partners did not follow the same policy), so exporters would win but will become more expensive imports.

I agree with Mrs Stephen Gordon

says: when my point of departure is "if it ain't broke, don't fix it ' is not at all clear, and for me that failed objective of 2% as a policy ... We could probably safely trade low and stable inflation expectations against higher inflation and a constant as an insurance policy against hitting the lower bound, but it is not clear that this option is available for us ... Did we hit the lower bound or did we just graze? The Bank never really see fit to implement a policy of quantitative easing, even if it (rightly) laid down the foundations to

do so.One thing frustrating through entire downturn or crisis or anything else you want to call it is how many have received monetary policy interest rates. However, this is far from the Bank of Canada or the Federal Reserve only policy option, despite claims to the contrary by well-known economists. As someone who teaches macroeconomics, should my share of the blame. For a generation taught us that monetary policy change just the federal funds rate. Occasionally, we talked about changing the reserve ratio. I suppose it is not surprising that so many believe the zero bound problem is such an important-we never taught students that there are alternatives!

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