. the porter report had some sympathy with this notion. there were three discernible lines of thinking here. first, monetary policy is itself a kind of debt management with an open market operation switching one public sector liability ( central bank deposits ) for another ( e. g. treasury bills ). second, changes in relative supplies of debt could affect the liquidity of the banks and hence their willingness to lend. third, debt management might directly alter the term structure of interest rates. these notions may have had greater plausibility at the time, when there were some indications of segmented markets. but over time, market segmentation diminished in importance as both lenders and borrowers became increasingly willing to adjust the maturity of their commitments in response to interest rate differences across the term structure. moreover, in the years following the publication of the porter report, evidence accumulated supporting the expectations theory of the term structure of interest rates. according to this theory, long - term rates are the average expected value of future short - term rates, plus a liquidity risk premium. although in principle the latter could vary systematically as the composition of debt changes, in practice such effects, if they exist at all, are of too short duration to have any macroeconomic impact. c. the canadian policy framework in the 1990s 1. the basic propositions between the 1960s and the 1990s, informed opinion about the appropriate role of central banks shifted radically. the current mainstream view can be briefly summarized in the following four propositions. first, the main objective of monetary policy is to preserve the value of money, in other words to achieve a very low rate of inflation over the long run. other economic objectives are not ignored, however, because price stability is the best contribution that monetary policy can make towards high employment and, more generally, towards a prosperous, growing economy. second, an independent monetary policy, or, more precisely, a domestically set objective for inflation, logically requires a floating exchange rate. third, markets, and price mechanisms, work efficiently and thus provide effective channels for the transmission of johnson and winder ( 1962 ) and reuber ( 1962 ). monetary policy through short - term interest rates and the exchange rate. fourth, short - term interest rates must be adjusted as much as required to meet the monetary policy objective. most of the present policy framework is, i hope, reasonably familiar to you. so i will spare you further detail. instead, i would like to underline the magnitude of the revision that has

paul jenkins : communicating canadian monetary policy : towards greater transparency remarks by mr paul jenkins, deputy governor of the bank of canada, to the ottawa economics association, ottawa, ontario, 22 may 2001. * * * i want, first, to thank the ottawa economics association for your invitation to speak to you today. i welcome this opportunity to talk about an important aspect of the work of the bank of canada in conducting monetary policy – communications. in the next few minutes i would like to discuss some of the factors that are central to monetary policy communications. i will touch on a few of the particular challenges we at the bank of canada face. and i ’ ll conclude with a few words on the bank ’ s communications approach, including its role in the new system of fixed dates for announcing interest rate decisions. the trend to openness and transparency let me begin with a brief backward glance. it is not so long ago that central banks did little to let people know what they were up to and why. indeed, in the conduct of monetary policy, little emphasis was placed on trying to explain the objectives of policy because those objectives were not clearly defined. without clear objectives for monetary policy, central bank actions were generally not predictable. and the conventional way of thinking among central banks was that it was best to say nothing and let actions speak for themselves. it is a different story today. indeed, there has been nothing less than a sea change in the way central banks view the role of communications in monetary policy. what we have seen in recent years is a broad and continuing trend among central banks towards greater openness and transparency in the conduct of monetary policy. this trend has come about not because of any “ fad ” for public relations or for marketing a central bank ’ s image. it has occurred because of fundamental changes in the way monetary policy is approached and conducted and the corresponding recognition that the effectiveness of monetary policy is improved through greater transparency. and to be transparent requires proactive and well - planned communication. why communications has become so important for monetary policy for the bank of canada, communications has become a strategic priority in supporting our goal of preserving a low and stable inflation environment. we believe that maintaining low, stable, and predictable inflation is the best contribution monetary policy can make to a productive, well - functioning economy. an important step towards increased transparency, and thus towards clear and focused communication, was taken in 1991 when canada adopted explicit inflation - control targets. the announcement of the targets clarified the objective of monetary policy