F4 - Macroeconomic Aspects of International Trade and Finance

• Assessing the US and Canadian neutral rates: 2025 update

  Staff Analytical Note 2025-16 Frida Adjalala, Felipe Alves, William Beaudoin, Hélène Desgagnés, Wei Dong, Ingomar Krohn, Jan David Schneider

  We assess both the US and Canadian nominal neutral rates to be in the range of 2.25% to 3.25%, unchanged from the range assessed in 2024.

  Content Type(s): Staff research, Staff analytical notes Research Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41

• Assessing the US and Canadian neutral rates: 2024 update

  Staff Analytical Note 2024-9 Frida Adjalala, Felipe Alves, Hélène Desgagnés, Wei Dong, Dmitry Matveev, Laure Simon

  We assess both the US and Canadian nominal neutral rates to be in the range of 2.25% to 3.25%, somewhat higher than the range of 2.0% to 3.0% in 2023. The assessed range is back to the level it was at in April 2019.

  Content Type(s): Staff research, Staff analytical notes Research Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41

• The Role of International Financial Integration in Monetary Policy Transmission

  Staff Working Paper 2024-3 Jing Cynthia Wu, Yinxi Xie, Ji Zhang

  We propose an open-economy New Keynesian model with financial integration that allows financial intermediaries to hold foreign long-term bonds. We study the implications of financial integration on monetary policy transmission. Among various aspects of financial integration, the bond duration plays a major role. These results hold for conventional and unconventional monetary policies.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, International financial markets, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E52, F, F3, F36, F4, F42

• International Portfolio Rebalancing and Fiscal Policy Spillovers

  Staff Working Paper 2023-56 Sami Alpanda, Uluc Aysun, Serdar Kabaca

  We evaluate, both empirically and theoretically, the spillover effects that debt-financed fiscal policy interventions of the United States have on other economies. We consider a two-country model with international portfolio rebalancing effects. We show that US fiscal expansions would increase global long-term rates and hinder economic activity in the rest of the world.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Fiscal policy, International topics JEL Code(s): E, E3, E32, E6, E62, F, F4, F41, F44

• International Economic Sanctions and Third-Country Effects

  Staff Working Paper 2023-46 Fabio Ghironi, Daisoon Kim, Galip Kemal Ozhan

  We study the transmission and third-country effects of international sanctions. A sanctioned country’s losses are mitigated, and the sanctioning country’s losses amplified, if a third country does not join the sanctions, but the third country benefits from not joining.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Exchange rates, International topics JEL Code(s): F, F3, F31, F4, F41, F42, F5, F51

• A Behavioral New Keynesian Model of a Small Open Economy Under Limited Foresight

  Staff Working Paper 2023-44 Seunghoon Na, Yinxi Xie

  This paper studies exchange rate dynamics by incorporating bounded rationality, that is, limited foresight, in a small open-economy model. This behavior of limited foresight helps explain several observations and puzzles in the data of exchange rate movements.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Exchange rates, International topics, Monetary policy transmission JEL Code(s): E, E4, E43, E7, E70, F, F3, F31, F4, F41

• The Macroeconomic Effects of Portfolio Equity Inflows

  Staff Working Paper 2023-31 Nick Sander

  I provide evidence that portfolio equity inflows can have expansionary effects on GDP and inflation if not offset by monetary policy. I use a shift-share instrument to estimate equity inflows based on plausibly exogenous timing of inflows into mutual funds with heterogeneous country portfolios.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, International financial markets, International topics, Monetary policy JEL Code(s): E, E3, E32, F, F3, F32, F4, F44

• The Canadian Neutral Rate of Interest through the Lens of an Overlapping-Generations Model

  Staff Discussion Paper 2023-5 Martin Kuncl, Dmitry Matveev

  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.

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E2, E21, E22, E4, E43, E5, E50, E52, E58, F, F4, F41

• Stress Relief? Funding Structures and Resilience to the Covid Shock

  Staff Working Paper 2023-7 Kristin Forbes, Christian Friedrich, Dennis Reinhardt

  Funding structures affected the amount of financial stress different countries and sectors experienced during the spread of COVID-19 in early 2020. Policy responses targeting specific vulnerabilities were more effective at mitigating this stress than those supporting banks or the economy more broadly.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Coronavirus disease (COVID-19), Exchange rates, Financial institutions, Financial stability, Financial system regulation and policies, International topics JEL Code(s): E, E4, E44, E6, E65, F, F3, F31, F36, F4, F42, G, G1, G18, G2, G23, G3, G38

• Risk Amplification Macro Model (RAMM)

  Technical Report No. 123 Kerem Tuzcuoglu

  The Risk Amplification Macro Model (RAMM) is a new nonlinear two-country dynamic model that captures rare but severe adverse shocks. The RAMM can be used to assess the financial stability implications of both domestic and foreign-originated risk scenarios.

  Content Type(s): Staff research, Technical reports Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Monetary policy transmission JEL Code(s): C, C5, C51, E, E3, E37, E4, E44, F, F4, F44