Putting Money Back into Monetary Policy: A Monetary Anchor for Price and Financial Stability

24 Pages Posted: 24 Nov 2010

See all articles by Philippe Bergevin

Philippe Bergevin

C.D. Howe Institute

David E. W. Laidler

University of Western Ontario - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 23, 2010

Abstract

The Bank of Canada should pay closer attention to the effects of money and credit growth on inflation and asset markets. The authors contend that maintaining price stability should remain the Bank’s only formal goal, but say greater attention should be paid to asset market stability. Once the role of asset markets in the mechanics of inflation or price-level targeting is made explicit, such a policy will promote orderly asset market behaviour. This hinges on the role broader money and credit aggregates play in the transmission mechanism that links monetary policy to the behaviour of the rest of the economy.

Keywords: Monetary Policy, Bank of Canada, Inflation, Price Stability, Asset Market Stability, Price-Level Targeting, Broad Money Aggregate (M2 )

JEL Classification: E52, E58

Suggested Citation

Bergevin, Philippe and Laidler, David E. W., Putting Money Back into Monetary Policy: A Monetary Anchor for Price and Financial Stability (October 23, 2010). C.D. Howe Institute Commentary, No. 312, October 2010, Available at SSRN: https://ssrn.com/abstract=1713948

Philippe Bergevin (Contact Author)

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

David E. W. Laidler

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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