highlight the key issues that figured in our policy deliberations. the two of us also appear before house of commons and senate committees twice a year. the bank now publishes more research and has become active on social media. the overarching goal of all this activity is to help canadians understand what we are doing, and why. of course, canada is not alone in this move toward transparency. my belief is that the additional accountability that comes with a formal inflation target has been the main driver of the transparency trend seen here and at other central banks. adjusting the paradigm now, just because inflation targeting has worked very well, that does not mean it cannot be improved. at each renewal, we have asked ourselves fundamental questions to make sure inflation targeting is delivering economic benefits most effectively. for example, in 2011, we clarified that the framework gives us the flexibility to adjust the time we need to return inflation to 3 / 5 bis central bankers'speeches target, if moving too quickly or slowly would worsen financial stability concerns. during the five years leading up to this renewal, we looked into three issues. the first was about as fundamental as you can get : is 2 per cent the right target? this has been a live issue throughout our experience with inflation targets. five years ago, our research considered whether we should lower the target. this time, given our experience with low inflation and the risk of deflation, we took a good look at the idea of raising the target. we considered this possibility seriously because central bank policy rates in many economies have been near, or at, historic lows, reaching the effective lower bound in some places. the idea is that interest rates would generally be higher if we had a higher inflation target, so we would have more room to lower rates in the future before we hit that effective lower bound. however, we have learned from recent experience that there are unconventional monetary policies that give us more room to manoeuvre than previously believed. these include pushing interest rates below zero or buying longer - term bonds to compress long - term yields. a higher inflation target would mean higher nominal interest rates and more room to manoeuvre, on average, but also would entail imposing a higher inflation tax on the economy. i think of this as paying dearly, every day, for insurance against the low - probability risk that another very large macroeconomic shock could occur in the future. besides, pushing inflation up from 2 per cent to 3 per cent might be quite difficult

23 the bank has never had to use negative nominal interest rates, quantitative easing or other asset purchases, although these have been implemented in other countries. the unconventional tools used in the united states and europe in the wake of the crisis prevented a bad situation from becoming even worse. that said, whether these tools are effective at achieving inflation objectives is still an area of debate. 24 it is also too early to tell whether they have important negative spillovers, particularly if they are used for a long time. because of this, improving clarity about our toolkit as part of the inflation - control agreement is a necessary step forward. having a credible contingency plan in place makes it easier to achieve the inflation target, even in normal times. 25 there are several lines of inquiry here. one is a suggestion highlighted by former federal reserve chair ben bernanke to stick with inflation targeting in normal times but switch to a temporary price - level target when conventional policy is 23 see z. he, “ evaluating the effect of the bank of canada ’ s conditional commitment policy, ” bank of canada staff discussion paper no. 2010 - 11 ( august 2010 ). for more on how the conditional commitment and other examples of forward guidance have worked in practice, see m. woodford, “ methods of policy accommodation at the interest - rate lower bound. ” in proceedings – economic policy symposium – jackson hole, 185 – 288. jackson hole, wyoming : federal reserve bank of kansas city. 24 a. reza, e. santor and l. suchanek, " quantitative easing as a policy tool under the effective lower bound, " bank of canada staff discussion paper no. 2015 - 14 ( november 2015 ) ; s. d. williamson, " quantitative easing : how well does this tool work? " federal reserve bank of st. louis regional economist ( third quarter 2017 ). 25 r. amano, t. carter and s., leduc, “ precautionary pricing : the disinflationary effects of elb risk, ” bank of canada staff working paper ( forthcoming ). - 10 constrained by the lower bound. 26 the idea is that making it clearer in extraordinary circumstances that the central bank is aiming for higher inflation would help push up prices through a shift in expectations. this is another idea for the list, but undoubtedly imperfect as well. japan ’ s experience with trying to boost inflation expectations raises questions about how successful this type of strategy might be, particularly in the current low inflation environment.