Inflation Targeting, Price-Level Targeting, and Fluctuations in Canada's Terms of Trade

Coletti and Lalonde compare inflation targeting and price-level targeting in the context of a small open economy subject to sizable terms-of-trade shocks. The authors summarize recent research that compares the ability of price-level targeting and inflation targeting to stabilize the macroeconomy when confronted with shocks similar to those experienced by Canada in recent years. Their preliminary results suggest that price-level targeting may represent a feasible alternative to traditional inflation targeting. Their article also provides insight into the direction of current research in this area at the Bank.

Experimental investigation of the forces and moments due to sideslip of a series of triangular vertical and horizontal tail combinations at Mach numbers

An experimental investigation was made at Mach numbers of 1.62, 1.93, and 2.41 of a series of tail combinations consisting of triangular vertical tail attached symmetrically to a triangular horizontal tail to determine the lateral force, yawing moment, and rolling moment due to sideslip. The apex angles of both the vertical- and horizontal-tail surfaces were varied systematically in order to obtain results for an appreciable range of operating conditions. The results of the investigation indicated that, for tails having subsonic leading edges and supersonic trailing edges, the lateral-force derivative and the yawing-moment derivative were predicted satisfactorily by the method presented in NACA TN 3071 except when the leading edges approach a sonic condition. The theoretical rolling-moment derivative was in fair agreement with the experimental derivative. For the limited tests in which both the leading and trailing edges were supersonic, the prediction of the lateral-force derivative and the yawing-moment derivative obtained from NACA TN 2412 was in good agreement with the experimental derivatives, whereas the prediction of the rolling-moment derivative was fair

What Drives Exchange Rates? New Evidence from a Panel of U.S. Dollar Bilateral Exchange Rates

We use a novel approach to identify economic developments that drive exchange rates in the long run. Using a panel of six quarterly U.S. bilateral real exchange rates – Australia, Canada, the euro, Japan, New Zealand and the United Kingdom – over the 1980-2007 period, a dynamic factor model points to two common factors. The first factor is driven by U.S. shocks, and cointegration analysis points to a long-run statistical relationship with the U.S. debt-to-GDP ratio, relative to all other countries in our sample. The second common factor is driven by commodity prices. Incorporating these relationships directly into a state-space model, we find highly significant coefficients. Then, we decompose the historical variation of each exchange rate into U.S. shocks, commodities, and a domestic component. We find a strong role for economic fundamentals: Changes in the two common factors, which are driven by the (relative) U.S. debt-to-GDP ratio and commodity prices, can explain between 36 and 96 per cent of individual countries' exchange rates in our panel.Exchange rates; Econometric and statistical methods

Inflation Targeting and Price-Level-Path Targeting in the GEM: Some Open Economy Considerations

This paper compares the performance of simple inflation targeting (IT) and price-level path targeting (PLPT) rules to stabilize the macroeconomy, in response to a series of shocks, similar to those seen in Canada and the United States over the 1983 to 2004 period. The analysis is conducted in a two-country (Canada and the United States), two-sector (tradables and nontradables) version of the International Monetary Fund’s Global Economy Model (GEM). The authors conclude that PLPT is slightly preferred to IT for delivering macroeconomic stability, as it delivers a reduction in inflation and nominal interest rate volatility, at the expense of slightly higher output gap variability. When the analysis is restricted to the shocks that have been most important for explaining movements in Canada’s terms of trade over this period, PLPT is still preferred to IT. The authors also show that their results are sensitive to the interaction between the relative importance of the different types of macroeconomic shocks that hit the economy, and the extent to which price and wage setting is forward looking. Lastly, the authors demonstrate that the choice of monetary policy framework in the United States does not affect the relative merits of PLPT versus IT in Canada.Economic models; Inflation: costs and benefits; Inflation and prices; Monetary policy framework

Investigation of two pitot-static tubes at supersonic speeds

The results of tests at a Mach number of 1.94 of an ogives-nose cylindrical pitot-static tube and similar tests at Mach numbers of 1.93 and 1.62 of a service pitot-static tube to determine body static pressures and indicated Mach numbers are presented and discussed. The radial pressure distribution on the cylindrical bodies is compared with that calculated by an approximate theory

Symposium Review of "The Amish" by Donald Kraybill, Karen Johnson-Weiner, and Steven Nolt

Summary by Megan Bogden; Review by Steven Reschly; Review by Benjamin Zeller; Review by Tom Coletti; Authors' Reply by Donald Kraybill, Karen Johnson-Weiner, and Steven Nol