Empirical Analysis of Inflation Targeting in Canada and its Enlightenment to China

Canada was one of the first countries to adopt inflation targeting, a new monetary policy framework which became popular worldwide in the 1990s. Then what kind of influences did inflation targeting bring to the Canadian economy? After a brief introduction of the Canadian inflation targeting, this paper employs the rolling test to verify the fact that inflation targeting has had major influences on Canadian economy, and applies the impulse response function to further prove that inflation targeting has had substantial effects on lowering inflation persistence, stabilizing prices and ironing out output fluctuation in Canada. These study results shed some light on inflation prevention and monetary policy framework adjustment in China.