In these circumstances, the commitment provided by inflation-control targets will be far more useful in attracting and holding investors to a relatively small, open economy like Canada’s than to the United States. However, I would argue that the transparency and accountability of monetary policy and the resulting discipline in central bank decision-making that the targets encourage would be good for any country.
And the greater predictability of the inflation outlook under a targeting regime should contribute to good long-term economic performance everywhere. Moreover, the automatic-stabilizer feature of targets should reassure those who worry that the central bank is overly concerned about inflation to the exclusion of the real economy. Finally, I would argue that transparency and accountability give autonomous central banks legitimacy in a democratic society.