Monetary Policy: Canada

Canadian authorities adopted inflation targeting monetary policy in 1991. Since that period, Canada has managed to keep inflation rate at a range of 1 percent and 3 percent in 1991 to 2004. However, some scholars query the effectiveness of this monetary policy because before its implementation, Canada was experiencing disinflation trend. Conventionally, the impact of inflationary targeting monetary policy is either positive or negative depending on the situation. Empirical studies have shown that, inflation targeting monetary policy has both positive and negative effects; however, the intensity varies from time to time as well as from economy to another. This research proposal predicts the relationship between economic growth and inflation targeting monetary policy to be positive. However, the correlation (measured by coefficient of determination) will be weak due to monetary policy complexities.

Key words: Economic Growth, Monetary Policy, Inflation