This book tests various hypotheses about what variables the Bank of Canada and the U.S. Federal Reserve plan to target using monetary policy. Chapter 1 uses the Rowe and Yetman (2002) technique to test whether the US Federal Reserve is targeting inflation or growth rates in real Gross Domestic Product. Chapter 2 investigates whether there has been a provincial bias in monetary policy in Canada. Chapter 2 used the Rowe-Yetman technique to determine whether monetary policy has been used to target inflation in certain provinces at the expense of inflation instability in other provinces. The findings suggest that there does not exist a bias in monetary policy. Chapter 2 also looks at whether the central bank has targeted output growth in certain provinces at the expense of output growth stability in other provinces. The findings show that the Bank of Canada has not smoothed either national or provincial GDP growth rates. Chapter 3 investigates whether there has been a tradeoff between inflation smoothing and output smoothing. The analysis shows that there indeed exists a negative tradeoff between inflation and output variability.

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