<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Since the 1990s there have been major changes in the way monetary policy is conducted. Since other monetary strategies did not result in the desired outcome, the first concept of inflation targeting was presented in New Zealand (1990), then in Canada (1991), England (1992), Sweden and Finland (1993), Australia and Spain (1994), Israel, Chile, Brasil, the Czech Republic, Poland, Hungary, Serbia and other countries. Thus, the application of this monetary regime has spread from economically developed to developing countries. This article examines the adoption, the formal framework for inflation targeting and the experience of the two countries that were leaders in the adoption of this modern strategy, New Zealand and Canada. At the time of the announcement of the inflation targets, inflation in both countries was around 6%. However, there are differences regarding the time frame. So, in New Zealand in a shorter period of time, credibility should have been achieved regarding the imbalance of monetary and fiscal policy. While, on the other hand, a longer time frame is envisaged for the Central Bank of Canada regarding achieving greater flexibility to mitigate price shocks. After all the above, it can be concluded that both observed countries (Canada and New Zealand) during the period 2008-2017, achieved positive effects from inflation targeting. In this sense inflation rates in the target range of 1-3% were achieved, except for a few years after the financial crisis (2008-2011), but after certain revisions of the formal framework, both countries successfully fought for greater economic growth and financial stability. The inflation targeting regime proved to be very successful in achieving the set targets, so both Central Banks continued to constantly update the formal and informal inflation targeting frameworks, in order to continuously achieve the expected effects.</p></abstract>

Since the 1990s there have been major changes in the way monetary policy is conducted. Since other monetary strategies did not result in the desired outcome, the first concept of inflation targeting was presented in New Zealand (1990), then in Canada (1991), England (1992), Sweden and Finland (1993), Australia and Spain (1994), Israel, Chile, Brasil, the Czech Republic, Poland, Hungary, Serbia and other countries. Thus, the application of this monetary regime has spread from economically developed to developing countries. This article examines the adoption, the formal framework for inflation targeting and the experience of the two countries that were leaders in the adoption of this modern strategy, New Zealand and Canada. At the time of the announcement of the inflation targets, inflation in both countries was around 6%. However, there are differences regarding the time frame. So, in New Zealand in a shorter period of time, credibility should have been achieved regarding the imbalance of monetary and fiscal policy. While, on the other hand, a longer time frame is envisaged for the Central Bank of Canada regarding achieving greater flexibility to mitigate price shocks. After all the above, it can be concluded that both observed countries (Canada and New Zealand) during the period 2008-2017, achieved positive effects from inflation targeting. In this sense inflation rates in the target range of 1-3% were achieved, except for a few years after the financial crisis (2008-2011), but after certain revisions of the formal framework, both countries successfully fought for greater economic growth and financial stability. The inflation targeting regime proved to be very successful in achieving the set targets, so both Central Banks continued to constantly update the formal and informal inflation targeting frameworks, in order to continuously achieve the expected effects.

Comparative Analysis of the Implementation of the Inflation Targeting Monetary Strategy in Canada and New Zealand

Economic Themes

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Since the 1990s there have been major changes in the way monetary policy is conducted. Since other monetary strategies did not result in the desired outcome,...

Comparative Analysis of the Implementation of the Inflation Targeting Monetary Strategy in Canada and New Zealand

Article Category: Review paper

Published Online: Dec 16, 2020

Page range: 401 - 414

Received: Jun 24, 2020

Accepted: Jul 20, 2020

DOI: https://doi.org/10.2478/ethemes-2020-0023

Keywords
Monetary regime of inflation targeting, Inflation rates, Consumer price index

© 2020 Suzana Stevanović et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Comparative Analysis of the Implementation of the Inflation Targeting Monetary Strategy in Canada and New Zealand

Article Category: Review paper

Published Online: Dec 16, 2020

Page range: 401 - 414

Received: Jun 24, 2020

Accepted: Jul 20, 2020

DOI: https://doi.org/10.2478/ethemes-2020-0023

KeywordsMonetary regime of inflation targeting, Inflation rates, Consumer price index

© 2020 Suzana Stevanović et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Monetary regime of inflation targeting, Inflation rates, Consumer price index