The Optimal Level of the Inflation Target: A Selective Review of the Literature and Outstanding IssuesBank of Canada research done prior to the most recent renewal of the inflation-control agreement in 2011 concluded that the benefits associated with a target below 2 per cent were insufficient to justify the increased risk of being constrained by the zero lower bound (ZLB) on nominal interest rates.
30 September 2015 Research Update - September 2015This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.
Because financial and macroeconomic conditions are tightly interconnected, financial stability considerations are an important element of any monetary policy framework. Yet, the circumstances under which it would be appropriate for the Bank to use monetary policy to lean against financial risks need to be more fully specified (Côté 2014).
In this paper, we investigate how liquidity conditions in Canada may affect domestic and/or foreign lending of globally active banks and whether this transmission is influenced by individual bank characteristics.
The payments landscape in Canada is rapidly changing and will continue to evolve, fuelled by strong and persistent drivers. In Canada, the Canadian Payments Association (CPA) is on a path to modernize Canada’s core payment systems.
The Carrot and the Stick: The Business Cycle Implications of Incentive Pay in the Labor Search ModelThis paper considers a real business cycle model with labor search frictions where two types of incentive pay are explicitly introduced following the insights from the micro literature on performance pay (e.g. Lazear, 1986).
How does aggregate profit uncertainty influence investment activity at the firm level? We propose a parsimonious adaptation of a factor-autoregressive conditional heteroscedasticity model to exploit information in a subindustry sales panel for an efficient and tractable estimation of aggregate volatility.
31 August 2015 Research Update - August 2015This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.
Country market shares of U.S. non-energy imports have changed considerably since 2002, with varying volatility across three subperiods: pre-crisis (2002–07), crisis (2007–09) and post-crisis (2009–14). In this paper, we analyze market shares for four main trading partners of the United States (Canada, Mexico, China and Japan).
We analyze how a wealth shift to emerging countries may lead to instability in developed countries. Investors exposed to expropriation risk are willing to pay a safety premium to invest in countries with good property rights.