Canadian monetary policy. If, for example, the Bank of Canada is using interest rates to target an inflation rate of 2 per cent … and there is an 8-quarter lag in the effect of the interest rate on inflation, then deviations of inflation from 2 per … quarters. This would imply that empirical causality tests of monetary policy on inflation could be very misleading. Our test …

In this paper, I consider a simple model in which agents learn about the inflation target of a central bank over time … by observing the policy instrument or inflation outcomes. Measuring credibility as the distance between the perceived … consistent with attaining the inflation target closer to that required to attain the output target. In this model, the crucial …

about the size of the monetary policy response that would be sufficient to achieve the targeted inflation rate. One possible … attaining credibility for their policy objectives. These steps have anchored inflation expectations to the target of the …