Tuesday, August 7, 2007

Reading Challenge XI

And now think tanks. We have not previously been here. I do not intend to go back.

Better Late Than Never: Towards A Systematic Review of Canada's Monetary Policy Regime

Commentary: This piece basically argues that since we achieved stable 2% inflation with relative ease, why not be more ambitious and target price stability, i.e. the time path of prices? While I think this bears consideration, the paper presents no compelling arguments other than saying it's possible.

I think it would be universally agreed that targeting a 1% rise in the CPI every year, and adjusting policy to compensate for prior results (e.g. if inflation runs at 1.5% for a quarter, don't bring it back to 1%, bring it down to 0.5% to even it out) has obvious if probably small benefits. The paper just needs to make the case that the central bank has that level of precision in its arsenal, and more importantly, that the increased interest rate volatility I suspect would be necessitated would not cause problems.

Estimating the Effect of the Canadian Government's Greenhouse Gas Policies

Commentary: The CD Howe Institute confirms its membership in the Pigou Club. There is also a nice graph detailing Canadian GHG emissions, the impact of various policies, and several targets that had been established (and were uniformly missed).

Everything else is not worth reading, because all their results are attributed to the CIMS model without any commentary on just how the model works. The website does not provide such detail either, and while I may not have read it if the minuitae were posted, posting something implies confidence.

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