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February 23, 2011

Major inflation-indexed government programs in Canada respond to rises in the Consumer Price Index, but not declines, leading to increased spending and reduced revenues for the government, according to a study released today by the C.D. Howe Institute. With a debate underway about whether it’s time for the Bank of Canada to move to a lower inflation target in a new inflation-control agreement, policymakers should address these asymmetries, say William B.P. Robson and Philippe Bergevin in The Costs of Inflexible Indexing: Avoiding the Adverse Fiscal Impacts of Lower Inflation.

 

William Robson

Bill Robson took office as CEO of the C.D. Howe Institute in July 2006, after serving as the Institute’s Senior Vice President since 2003 and Director of Research from 2000 to 2003. He has written more than 270 monographs, articles, chapters and books on such subjects as government budgets, pensions, healthcare financing, inflation and currency issues.