The Origins and Evolution of Inflation Targeting at the Bank of Canada (1973-2013)

April 2013

The main question this paper attempts to answer is: How did the Bank of Canada end up choosing inflation targeting as its monetary policy regime? I explore the origins of inflation targeting at the Bank of Canada and how the target has evolved since its adoption in 1991. The paper looks at the Canadian economic experience before and after inflation targeting through the lens of published remarks of Bank of Canada governors, focusing mostly on three consecutive governorships: Gerald Bouey (1973-1987), John Crow (1987-1994), and Gordon Thiessen (1994-2001). The evolution to flexible inflation targeting, its relation to the Great Recession, and the possibility of moving to nominal GDP targeting, are explored through the publications of the Bank under current governor Mark Carney (2008-2013).