D84 - Expectations; Speculations
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Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media
News media present competing interpretations of what breaking news implies for the macroeconomy. Recent examples include news reporting on high inflation and yield curve inversions. Do these narratives shape macroeconomic sentiment? In this paper, we highlight the importance of narratives using evidence linking traditional media and social media. -
What Consistent Responses on Future Inflation by Consumers Can Reveal
We analyze factors that may explain consistent answers to questions about inflation expectations in the Canadian Survey of Consumer Expectations. We also compare the inflation forecasts of consumers with consistent responses with those of professional forecasters. -
November 22, 2022
Tracking the financial vulnerabilities of households and the housing market
The Bank of Canada is publishing a new set of indicators of financial vulnerabilities. This will allow households, the private sector, financial authorities and governments to better understand and monitor the evolution of two key vulnerabilities in the financial system: the elevated level of household indebtedness and high house prices. -
Behavioral Learning Equilibria in New Keynesian Models
We introduce behavioral learning equilibria (BLE) into DSGE models with boundedly rational agents using simple but optimal first order autoregressive forecasting rules. The Smets-Wouters DSGE model with BLE is estimated and fits well with inflation survey expectations. As a policy application, we show that learning requires a lower degree of interest rate smoothing. -
How Do People View Price and Wage Inflation?
This paper examines household-level data from the Canadian Survey of Consumer Expectations (CSCE) to understand households’ expectations about price and wage inflation, how those expectations link to views about labour market conditions and the subsequent impact on households’ outlook for real spending growth. -
A Horse Race of Monetary Policy Regimes: An Experimental Investigation
How should central banks design monetary policy in stable times and during recessions? We run a horse race between five monetary policy frameworks in an experimental laboratory to assess how well the different approaches can manage the public’s expectations and stabilize the economy. -
The Financial Origins of Non-fundamental Risk
We explore the idea that the financial sector can be a source of non-fundamental risk to the rest of the economy. We also consider whether policy can be used to reduce this risk—either by increasing the supply of publicly backed safe assets or by reducing the demand for safe assets. -
The COVID-19 Consumption Game-Changer: Evidence from a Large-Scale Multi-Country Survey
A multi-country consumer survey investigates why and how much households decreased their consumption in five key sectors after pandemic-related restrictions were lifted in Europe in July 2020. Beyond infection risk and precautionary saving motives, households also reported not missing some consumption items, which may indicate preference shifts and structural changes in the post-COVID-19 economy. -
Update on housing market imbalances and household indebtedness
Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified.