Price Stability: How Canada's Governor Crow Approached It

From 1976 to 1986, Canada's price level had more than doubled. Over the next 10 years, from 1986 to 1996, it rose only by a little over one-third. The appointment of Governor Crow to lead the Bank of Canada in 1987 and more principled devotion to the goal of price stability in a number of other advanced industrial countries contributed to the dramatic change in outcomes. This article seeks to discern and appreciate the structures of the model implicit in the Governor's successful approach to achieving a lasting reduction of the rate of inflation to near zero.