Don Coletti was appointed Advisor to the Governor effective 26 August 2013. He is co-Secretary to the Governing Council and an Advisor to the Governor on subjects related to the Canadian economy and monetary policy. He is also leading the development of the Bank’s next generation of models for projections and policy analysis. From 2013 to 2021 he was responsible for financial system issues, including vulnerabilities, reforms and market dynamics, and their implications for financial stability and monetary policy.
Before becoming an Advisor, Mr. Coletti was Managing Director of the Bank’s International Economic Analysis Department, a position he held from September 2010. In this capacity, he managed the activities of the department, which include analyzing current and prospective developments in foreign countries and commodity prices, as well as providing analysis and policy advice on global economic and financial issues. He also guided the conduct of in-depth research on topics related to international financial markets and the global economy. From 2008 until 2010, he was Deputy Managing Director of the Bank’s Canadian Economic Analysis Department.
Born in Bolzano, Italy, Mr. Coletti obtained a master’s degree in economics from the University of Western Ontario.
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.
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.
Coletti and Lalonde compare inflation targeting and price-level targeting in the context of a small open economy subject to sizable terms-of-trade shocks. The authors summarize recent research that compares the ability of price-level targeting and inflation targeting to stabilize the macroeconomy when confronted with shocks similar to those experienced by Canada in recent years. Their preliminary results suggest that price-level targeting may represent a feasible alternative to traditional inflation targeting. Their article also provides insight into the direction of current research in this area at the Bank.
A nation's productivity is the prime determinant of its real incomes and standard of living, as well as being a major determinant of its potential output. In the short run, deviations of actual output from potential output are a useful indicator of inflationary pressures. This article is a short summary of the proceedings of the workshop, which focus on productivity and potential output growth among industrialized countries. The research is organized under three main themes: estimating potential growth; productivity and growth; and institutions, policies, and growth.
The conduct of monetary policy within an inflation-targeting framework requires the establishment of an inflation-target horizon, which is the average time it takes inflation to return to the target. Policy-makers have an interest in communicating this horizon, since it is likely to help anchor inflation expectations. This article focuses on the determination of the appropriate policy horizon by reporting on two recent Bank of Canada studies. The evidence suggests that the current target horizon of six to eight quarters remains appropriate. It is important to note that the duration of the optimal inflation-target horizon varies widely, depending on the combination of shocks to the economy. In rare cases when the financial accelerator is triggered by a persistent shock, such as an asset-price bubble, it may be appropriate to take a longer view of the inflation-target horizon.
The 2002 Bank of Canada Conference focused on price adjustment, a critically important issue for monetary policy. Given the acceptance throughout the 1990s and 2000s of the existence of price stickiness in goods or labour markets, or both, and of the important role that monetary policy can play in an economy, the time was right for a conference that would focus on current developments in this area of research, particularly within a Canadian context. Conference papers covering both theoretical and empirical studies explored such themes as sources of the persistence of inflation, forward-looking models of inflation, models of inflation in open economies, the macroeconomic effects of technology shocks, and models of the interaction between wages, prices, and real economic outcomes.
This article examines another strategy in the Bank's approach to dealing with an uncertain world: the use of carefully articulated models to produce economic forecasts and to examine the implications of the various risks to those forecasts. Economic models are deliberate simplifications of a complex world that allow economists to make predictions that are reasonably accurate and that can be easily understood and communicated. By using several models, based on competing paradigms, the Bank minimizes policy errors that could result from relying on one view of the world and one philosophy of model design. The authors review some of the models currently used at the Bank, as well as the role of judgment in the projection process.
The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities, by Don Coletti, Marc-André Gosselin and Cameron MacDonald, examines the increased importance of mortgage finance companies (MFCs) in the Canadian mortgage market. The authors discuss the MFC business model, highlighting MFCs’ relationship with mortgage brokers and banks, as well as the benefits they bring to Canadian borrowers. The authors conclude with a discussion of the impact of MFCs on financial system vulnerabilities.
"Constructing the Staff Economic Projection at the Bank of Canada" In: Practical Experience with Inflation Targeting, proceedings of a conference held by the Czech National Bank. May 2004.
Working paper
"Empirical Estimation and the Quarterly Projection Model: An Example Focussing on the External Sector" (with Robert Amano and Stephen Murchison), Sveriges Riksbank Working Paper No. 104.
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