The optimal level of the inflation target

Discussion Paper/Document d’analyse 2015-8 The Optimal Level of the Inflation Target: A Selective Review of the Literature and Outstanding Issues by Oleksiy Kryvtsov and Rhys R. Mendes Bank of Canada Discussion Paper 2015-8 October 2015 The Optimal Level of the Inflation Target: A Selective Review of the Literature and Outstanding Issues by Oleksiy Kryvtsov1 and Rhys R. Mendes2 1International Eco [...] In this paper, we provide an overview of the current state of knowledge and key outstanding issues regarding the costs and benefits of a higher inflation target as a complement to earlier Bank analysis that studied the effects of a lower inflation target. [...] S.] recessions and subsequent recoveries.” In light of the ongoing debate and the availability of new data, the importance of DNWR should be re-examined. [...] However, the accumulation of evidence since the last renewal in November 2011 has reinforced the importance of the ZLB. [...] Of course, advances in monetary policy and financial regulation together with changes in the structure of the economy probably mean that this longer sample overstates the volatility of output that can be expected in the future.