We quantitively assess the risks of a wage-price spiral occurring in Canada over history. We find the risk of a wage-price spiral increases when the inflation expectations become unanchored and the credibility of central banks declines.
Using two complementary approaches, we investigate the importance of U.S. macroeconomic news in driving low-frequency fluctuations in the term structure of interest rates in Canada, Sweden and the United Kingdom. We find that U.S. macroeconomic news is particularly important to explain changes in the expectation components of the nominal, real and break-even inflation rates of small open economies.
We show how Canadian mortgage debt dynamics can be modelled in a semi-structural macroeconomic model, such as the Bank of Canada’s LENS. The model we propose accounts for Canada’s unique mortgage debt structure.