Staff research

Exploring the potential benefits of inflation overshooting

Staff analytical note 2021-16 Robert Amano, Marc-André Gosselin, Kurt See
After a period with the interest rate at the effective lower bound, temporarily overshooting inflation may offer important economic benefits. This may be especially true for vulnerable segments of the population, such as workers with low attachment to the labour force and the long-term unemployed.
Content Type(s): Staff research, Staff analytical notes Research Topic(s): Inflation targets, Labour markets, Monetary policy, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52, J, J2, J20 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting

Evolving Temperature Dynamics in Canada: Preliminary Evidence Based on 60 Years of Data

Staff working paper 2021-22 Robert Amano, Marc-André Gosselin, Julien McDonald-Guimond
Are summers getting hotter? Do daily temperatures change more than they used to? Using daily Canadian temperature data from 1960 to 2020 and modern econometric methods, we provide economists and policy-makers evidence on the important climate change issue of evolving temperatures.
Content Type(s): Staff research, Staff working papers Research Topic(s): Climate change, Econometric and statistical methods JEL Code(s): C, C2, C22, Q, Q5, Q54 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Structural challenges, Climate change

Strengthening Inflation Targeting: Review and Renewal Processes in Canada and Other Advanced Jurisdictions

Staff discussion paper 2020-7 Robert Amano, Thomas J. Carter, Lawrence L. Schembri
We summarize the review and renewal process at four central banks (Reserve Bank of New Zealand, Bank of England, Sveriges Riksbank and the US Federal Reserve Bank) and compare them with the process at the Bank of Canada, which has been well-established since 2001.
Content Type(s): Staff research, Staff discussion papers Research Topic(s): Central bank research, Inflation targets, Monetary policy framework JEL Code(s): E, E5, E52, E58 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission

Average is Good Enough: Average-inflation Targeting and the ELB

Staff working paper 2020-31 Robert Amano, Stefano Gnocchi, Sylvain Leduc, Joel Wagner
The Great Recession and current pandemic have focused attention on the constraint on nominal interest rates from the effective lower bound.
Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, Monetary policy framework JEL Code(s): E, E3, E31, E32, E5, E52 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission

Redistributive Effects of a Change in the Inflation Target

Staff analytical note 2017-13 Robert Amano, Thomas J. Carter, Yaz Terajima
In light of the financial crisis and its aftermath, several economists have argued that inflation-targeting central banks should reconsider the level of their inflation targets. While the appropriate level for the inflation target remains an open question, it’s important to note that any transition to a new target would entail certain costs.
Content Type(s): Staff research, Staff analytical notes Research Topic(s): Inflation targets, Monetary policy framework JEL Code(s): E, E5, E52, E58 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting

Downward Nominal Wage Rigidity Meets the Zero Lower Bound

Staff working paper 2017-16 Robert Amano, Stefano Gnocchi
We add downward nominal wage rigidity to a standard New Keynesian model with sticky prices and wages, where the zero lower bound on nominal interest rates is allowed to bind. We find that wage rigidity not only reduces the frequency of zero bound episodes but also mitigates the severity of corresponding recessions.
Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation targets, Labour markets, Monetary policy framework JEL Code(s): E, E2, E24, E3, E32, E5, E52 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting

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Bank publications

Bank of Canada Review articles

May 16, 2016

The Micro and Macro of Downward Nominal Wage Rigidity

Bank of Canada Review - Spring 2016 Robert Amano, Dany Brouillette, Stefano Gnocchi, Natalia Kyui
The article examines the extent of downward nominal wage rigidity in Canada and its implications for monetary policy. The authors ask whether its existence is a sufficient argument for a higher inflation target if concerns about the effective lower bound are adequately addressed.
Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Inflation and prices, Inflation targets, Labour markets, Monetary policy framework JEL Code(s): E, E3, E4, E5, J, J2, J23, J3, J30
November 13, 2014

Recent Developments in Experimental Macroeconomics

Bank of Canada Review - Autumn 2014 Robert Amano, Oleksiy Kryvtsov, Luba Petersen
This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted by Bank of Canada economists has shed light on a number of issues important to monetary policy, such as the relative efficacy between price-level and inflation targeting, and the nature of inflation expectations formation.
Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Inflation and prices, Monetary policy framework JEL Code(s): C, C9, E, E3, E31, E5, E52
April 9, 2009

Next Steps for Canadian Monetary Policy

Bank of Canada Review - Spring 2009 Robert Amano, Thomas J. Carter, Donald Coletti
In 2006, the Bank initiated a research program exploring two alternatives to the current inflation-targeting framework: (i) lowering the inflation target and (ii) shifting to a price-level target. This article discusses progress to date, places the Bank's findings in the context of a broader literature, and identifies avenues for future research.
Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Central bank research, Economic models, Inflation and prices, Inflation targets, Inflation: costs and benefits, Monetary policy framework
April 15, 2006

Issues in Inflation Targeting: A Summary of the Bank of Canada Conference Held 28-29 April 2005

Bank of Canada Review - Spring 2006 Robert Amano, Raphael Solomon
The Bank of Canada's 2005 conference focused on two critical issues: price-level targets versus inflation targets, and the appropriate level of inflation. Session topics included new methodological approaches to examining the validity of the New Keynesian Phillips curve for Canada; the monetary policy implications of border effects and the financial-accelerator model; the zero lower bound on nominal interest rates; and inflation and welfare in general-equilibrium macroeconomic models. A panel of invited speakers discussed the issues of each session, and two distinguished speakers gave their perspectives on inflation.
Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Inflation and prices, Inflation targets, Monetary policy framework

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Journal publications

Refereed journals

  • "Risk Premium Shocks and the Zero Bound on Nominal Interest Rates"
    (with Malik Shukayev). Forthcoming Journal of Money, Credit, and Banking.
  • "Optimal Price-Level Drift Under Commitment in the Canonical New Keynesian Model"
    (with Steven Ambler and Malik Shukayev). Canadian Journal of Economics, 45 (3): 1023-1036.
  • "Trend Inflation, Wage and Price Rigidities, and Productivity Growth"
    (with Kevin Moran, Stephen Murchison, and Andrew Rennison) Journal of Monetary Economics (2009) 56: 353-364.
  • "Canadian City Housing Prices and Urban Market Segmentation"
    (with Jason Allen, David P. Byrne, and Allan W. Gregory). Canadian Journal of Economics (2009) 42: 1132-1149.
  • "The Macroeconomic Effects of Non-Zero Trend Inflation"
    (with Steve Ambler and Nooman Rebei). Journal of Money, Credit and Banking (2007) 39: 1819-1836.
  • "Inflation Persistence and Monetary Policy: A Simple Result"
    Economics Letters (2007) 94: 26-31.
  • "Government Expenditures and the Permanent-Income Model"
    (with Tony Wirjanto) Review of Economic Dynamics (1998) 1: 719-730.
  • "Intratemporal Substitution and Government Spending"
    (with Tony Wirjanto) Review of Economics and Statistics (1997) 79: 605-609.
  • "Intertemporal Substitution, Imports and the Permanent-Income Model"
    (with Tony Wirjanto) Journal of International Economics (1996) 40: 439-457.
  • "Nonstationary Regression Model with a Lagged Dependent Variable"
    (with Tony Wirjanto) Communications in Statistics: Theory and Methods (1996) 25: 1489-1503.
  • "Terms of Trade and Real Exchange Rates: The Canadian Evidence"
    (with Simon van Norden) Journal of International Money and Finance (1995) 14: 83-104.