Assessing the Impact of Changes in Transparency and Accountability at the Bank of Canada

Abstract

The introduction of inflation targets in Canada in 1991 clarified the objectives of monetary policy. One of the objectives of the new policy was to ensure that the public would henceforth be able to more easily assess monetary policy performance based on the Bank of Canada's record at achieving low and stable inflation. An obvious question then is to ascertain whether in fact, as a former Governor stated, ...public commentary on monetary policy since 1991 has involved a fairer assessment of the performance of the Bank of Canada. Tests, using daily interest rate and exchange rates and monthly inflation and inflation forecast data, are presented which shed light on this question. Some comparative UK and US data are also used to address the issue whether central bank transparency and accountability have separate impact on the behavior of financial asset prices.