Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189363 
Authors: 
Year of Publication: 
2006
Series/Report no.: 
Queen's Economics Department Working Paper No. 1087
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
Abstract: 
Wicksell, writing around the start of the 20th century, outlined an approach to monetary policy strikingly similar to the modern approach, of which the Bank of Canada has been a pioneer. Its features include: the overriding objective of price stability (or low inflation); an interest rate instrument controlled by the rates on settlement balances at the central bank; and a policy rule under which the instrument varies in response to deviations from the objective. Wicksell's natural rate of interest has resurfaced as the neutral rate in mainstream macroeconomic models; and his description of the inflation process has parallels in the modern Phillips curve. Moreover, in a mandate for price stability, one can find a logical basis for the independence and accountability of central banks. The paper tries to explain why Wicksell's ideas fell by the wayside for a century, and describes how the Bank of Canada, by pragmatic steps in the 1990s, helped reinvent Wicksell, and install a neo-Wicksellian monetary policy.
Subjects: 
Wicksell
central bank
monetary policy
Bank of Canada
JEL: 
E42
E52
E58
Document Type: 
Working Paper

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