Bank of Canada Should Watch Money and Credit Growth for Effects on Inflation
and Asset Markets: C.D. Howe Institute

TORONTO, Oct. 27 /CNW/ - The Bank of Canada should pay closer attention to the effects of money and credit growth on inflation and asset markets, according to a study released today by the C.D. Howe Institute. In Putting Money Back into Monetary Policy: A Monetary Anchor for Price and Financial Stability, authors Dr. David Laidler, Fellow-in-Residence and member of the C.D. Howe Institute's Monetary Policy Council and Philippe Bergevin, C.D. Howe Institute Policy Analyst, propose that the Bank of Canada should begin to calculate and publish a "reference value" for broad money growth.

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.

For the study go to LINK http://www.cdhowe.org/pdf/Commentary_312.pdf

For further information:

Dr. David Laidler,
Philippe Bergevin,
Policy Analyst, C.D. Howe Institute.
416-865-1904