In 2019, New Zealand created a formal monetary policy committee and enshrined the dual mandate (price stability and full employment) into their law and the policy targets agreement between the government and the Reserve Bank of New Zealand.
This important improvement in transparency about monetary policy objectives, combined with higher levels of other types of transparency about the analytical framework and decision-making process, has put the Reserve Bank of New Zealand back into the club of the most transparent central banks in the world.
Canada has fallen behind these transparency leaders, but could easily catch up with improved transparency about monetary policy objectives and the monetary policy-making process.
"We suggest that the Government enshrine the dual mandate into the Bank of Canada Act with a formal monetary policy committee."
During our Choosing the Right Target conference, we heard Doug Laxton present the case for a 'dual' mandate, one in which the Bank of Canada would take into account not only inflation, but also the state of the economy, as measured by the 'output gap' between actual and potential output. This paper, co-authored by Laxton and Asya Kostanyan, provides a package of proposals about how the Bank and the Government could improve inflation targeting in Canada and deal more decisively with the effective lower bound on nominal interest rates without raising the long-term two per cent inflation target. Accompanying the paper is a discussion by Francisco Ruge-Murcia, who has doubts about just how transparent the new system would be.