E52 - Monetary Policy
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Monetary Policy Transmission, Bank Market Power, and Wholesale Funding Reliance
I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices. -
Time Use and Macroeconomic Uncertainty
We estimate the effects of economic uncertainty on time use and discuss its macroeconomic implications. We develop a model to demonstrate that substitution between market and non-market work provides an additional insurance margin to households, weakening precautionary savings and labour supply and lowering aggregate demand, ultimately amplifying the contractionary effects of uncertainty. -
Central Bank Forecasting: A Survey
We review the literature on central bank forecasting with a special focus on the Federal Reserve, European Central Bank, Bank of England and Bank of Canada. -
The Canadian Neutral Rate of Interest through the Lens of an Overlapping-Generations Model
We use a small open economy model with overlapping generations to evaluate secular dynamics of the neutral rate in Canada from 1980 to 2018. We find that changes in both foreign and domestic factors resulted in a protracted decline in the neutral rate. -
Introducing the Bank of Canada’s Market Participants Survey
The Market Participants Survey (MPS) gathers financial market participants’ expectations for key macroeconomic and financial variables and for monetary policy. This staff analytical note describes the MPS’s objectives and main features, its process and design, and how Bank of Canada staff use the results. -
The 2021–22 Surge in Inflation
The rise in inflation in 2021–22 sparked a growing literature and debate over the causes of the surge as well as the near- and medium-term path for inflation. This review offers three key messages. -
Gazing at r-star: A Hysteresis Perspective
Many explanations for the decline in real interest rates over the last 30 years point to the role that population aging or rising income inequality plays in increasing the long-run aggregate demand for assets. Notwithstanding the importance of such factors, the starting point of this paper is to show that the major change driving household asset demand over this period is instead an increased desire—for a given age and income level—to hold assets. -
Understanding Post-COVID Inflation Dynamics
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. Our model can generate more sizable inflation surges due to cost-push and demand shocks than a standard linearized model when inflation is high. -
Monetary Policy, Credit Constraints and SME Employment
We revisit an old question: how do financial constraints affect the transmission of monetary policy to the real economy? To answer this question, we propose a simple empirical strategy that combines firm-level employment and balance sheet data, identified monetary policy shocks and survey data on financing activities.