Empirical Economics

, Volume 8, Issue 1, pp 15–45 | Cite as

Anatomy of canadian inflation: An analysis with CANDIDE model 2.0

  • P. S. Rao
  • B. K. Lodh
Article
  • 53 Downloads

Abstract

The objective of this paper is to analyze the causes of inflation projected for Canada through out the 1980s, using CANDIDE Model 2.0 as reported in the 18th Annual Review base case. Our analysis suggests that, in the medium-run inflation is not only a monetary phenomenon but also caused by a host of other factors: external inflation, foreign interest rates, low productivity growth, labour market tightness, domestic energy pricing and indexation of wages to CPI, a measure of inflation that reflects both domestic and foreign price pressures.

Our results indicate that the restrictive aggregate damand policies alone will not make a significant dent in inflation without incurring substantial loss in output and employment. Our analysis suggests that we might better fight inflation using a balanced mix of aggregate demand and supply management policies and incentive based income policies.

Keywords

Supply Management Income Policy Base Income Domestic Energy Price Pressure 

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Copyright information

© Physica-Verlag 1983

Authors and Affiliations

  • P. S. Rao
    • 1
  • B. K. Lodh
    • 1
  1. 1.Economic Council of OttawaOttawa

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