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Wilfrid Laurier University School of Business & Economics
November 26, 2014

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Economics

2002-02 EC: How has Inflation Changed in Canada? (working paper)


Johnson, D., & Gerlich, S.

published: 2002 | Research publication | Working Paper - Economics

ABSTRACT: Has the inflation process fundamentally changed in Canada in the last decade? We compare the dynamics of inflation from 1964 through 1988 to the dynamics of inflation from 1989 to 2001. Although the average rate of inflation fell and inflation has become less variable after 1988, we conclude the dynamics of inflation have not changed substantially. A negative output gap reduces inflation and the adjustment of expected inflation to lagged actual inflation continues to be slow. The sacrifice ratio, the short-run inflation-output tradeoff, remains similar. Monetary policy in Canada faces the same choices.

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