Putting Money Back into Monetary Policy: A Monetary Anchor for Price and Financial Stability
24 Pages Posted: 24 Nov 2010
Date Written: October 23, 2010
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: Suggested Citation