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369
result(s)
A Blueprint for the Fourth Generation of Bank of Canada Projection and Policy Analysis Models
Staff Discussion Paper 2023-23
Donald Coletti
The fourth generation of Bank of Canada projection and policy analysis models seeks to improve our understanding of inflation dynamics, the supply side of the economy and the underlying risks faced by policy-makers coming from uncertainty about how the economy functions.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Economic models,
Inflation and prices,
Labour markets,
Monetary policy and uncertainty
JEL Code(s):
C,
C5,
C50,
C51,
C52,
C53,
C54,
C55
Tattle-tails: Gauging downside risks using option prices
Staff Analytical Note 2023-13
Greg Adams,
Maksym Tupis
Options markets offer unique insights into the changing risks different assets face, which helps us better understand the broader risks to the Canadian economy. We show how option prices help reveal that investors did not anticipate large downside risks to either major Canadian banks or economic growth during the March 2023 financial sector system stress, a period when policy-makers and investors were unsure of what the future held for Canada’s economy.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets,
Monetary policy and uncertainty,
Recent economic and financial developments
JEL Code(s):
E,
E4,
E44,
E5,
E52
A Behavioral New Keynesian Model of a Small Open Economy Under Limited Foresight
Staff Working Paper 2023-44
Seunghoon Na,
Yinxi Xie
This paper studies exchange rate dynamics by incorporating bounded rationality, that is, limited foresight, in a small open-economy model. This behavior of limited foresight helps explain several observations and puzzles in the data of exchange rate movements.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Exchange rates,
International topics,
Monetary policy transmission
JEL Code(s):
E,
E4,
E43,
E7,
E70,
F,
F3,
F31,
F4,
F41
Digitalization: Implications for Monetary Policy
Staff Discussion Paper 2023-18
Vivian Chu,
Tatjana Dahlhaus,
Christopher Hajzler,
Pierre-Yves Yanni
We explore the implications of digitalization for monetary policy, both in terms of how monetary policy affects the economy and in terms of data analysis and communication with the public.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Digitalization,
Inflation and prices,
Market structure and pricing,
Monetary policy,
Monetary policy communications,
Monetary policy transmission
JEL Code(s):
C,
C4,
C8,
E,
E3,
E31,
E32,
E5,
E52
It takes a panel to predict the future: What the stock market says about future economic growth in Canada
Staff Analytical Note 2023-9
Greg Adams,
Jean-Sébastien Fontaine
Valuation ratios in the Canadian stock market can help reveal investors’ expectations about future economic growth because the impact of economic growth on valuation ratios can vary across industries. We find that this variation helps produce accurate forecasts of future growth of real gross domestic product in Canada. The forecasts from our model declined by just over 3 percentage points between January 2022 and February 2023—a period when the Bank of Canada rapidly increased the overnight rate. As well, we find that interest-rate-sensitive industries had an outsized contribution to this expected slowdown in growth.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Asset pricing,
Financial markets,
Monetary policy transmission
JEL Code(s):
E,
E4,
E44,
E47,
E5,
E52
Monetary Policy Transmission, Bank Market Power, and Wholesale Funding Reliance
Staff Working Paper 2023-35
Amina Enkhbold
I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial institutions,
Inflation targets,
Monetary policy transmission,
Wholesale funding
JEL Code(s):
E,
E4,
E44,
E5,
E52,
G,
G2,
G21
Time Use and Macroeconomic Uncertainty
Staff Working Paper 2023-29
Matteo Cacciatore,
Stefano Gnocchi,
Daniela Hauser
We estimate the effects of economic uncertainty on time use and discuss its macroeconomic implications. We develop a model to demonstrate that substitution between market and non-market work provides an additional insurance margin to households, weakening precautionary savings and labour supply and lowering aggregate demand, ultimately amplifying the contractionary effects of uncertainty.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Coronavirus disease (COVID-19),
Domestic demand and components,
Monetary policy and uncertainty
JEL Code(s):
E,
E2,
E24,
E3,
E32,
E5,
E52,
J,
J2,
J22
Reviewing Canada’s Monetary Policy Implementation System: Does the Evolving Environment Support Maintaining a Floor System?
Staff Discussion Paper 2023-10
Toni Gravelle,
Ron Morrow,
Jonathan Witmer
At the onset of the pandemic, the Bank of Canada transitioned its framework for monetary policy implementation from a corridor system to a floor system, which it has since decided to maintain. We provide a comprehensive analysis of both frameworks and assess their relative merits based on five key criteria that define a sound framework.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Market structure and pricing,
Monetary policy implementation,
Payment clearing and settlement systems
JEL Code(s):
D,
D4,
D47,
E,
E4,
E42,
E5,
E58
A Review of the Bank of Canada’s Support of Key Financial Markets During the COVID-19 Crisis
Staff Discussion Paper 2023-9
Joshua Fernandes,
Michael Mueller
The COVID-19 pandemic placed unprecedented strain on the global financial system. We describe how the Bank of Canada responded to the rapidly deteriorating liquidity in core Canadian fixed-income markets.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Coronavirus disease (COVID-19),
Financial markets,
Market structure and pricing,
Monetary policy and uncertainty
JEL Code(s):
E,
E4,
E44,
E5,
E58,
G,
G0,
G01