The Framework of Monetary Policy in Canada

  Prepare a 1500-1750 word policy position paper for an informed but non-technical audience outlining a revision to the 2021 Renewal of the Monetary Policy Framework, the agreement between the Government of Canada and the Bank of Canada for the objectives and operation of monetary policy. By an informed non-technical audience, think of a report for civil servants and elected officials. Note that in contrast to previous years, the 2021 renewal introduces some additional language on the need for flexibility in certain instances, and communications around flexibility. You are welcome to explore revisions that address these parts of the renewal. To identify an interesting revision, I suggest you do one or more of the following: (1) explore the existing monetary policy literature; (2) examine monetary policy arrangements at other central banks; (3) examine work done at the Bank of Canada on changes to the framework. Your revision to the current policy framework must meet the following general criteria: o Be grounded in reality; o Be set within the existing inflation-targeting framework; o Revise some part of the existing framework; o Be practical; o Have a clearly stated objective. An obvious — and acceptable — revision would be a specific change in the inflation target; say from 1-3 percent target band to some other target band. Other possibilities: o Different measure of inflation; o Different target variable; o Different time horizon; o Different communication requirements.