Staff discussion papers
Prospects for Global Current Account RebalancingThe authors use the Bank of Canada's version of the Global Economy Model, a multi-country, multi-sector dynamic stochastic general-equilibrium model with an active banking system (the BoC-GEM-FIN), to study the evolution of global current account balances following the recent global financial crisis.
The Power of Many: Assessing the Economic Impact of the Global Fiscal StimulusThe Bank of Canada Global Economy Model (BoC-GEM) is used to examine the effect of various types of discretionary fiscal policies on different regions of the globe. The BoC-GEM is a microfounded dynamic stochastic general-equilibrium global model with six regions, multiple sectors, and international linkages.
Staff working papers
Countercyclical Bank Capital Requirement and Optimized Monetary Policy RulesUsing BoC-GEM-Fin, a large-scale DSGE model with real, nominal and financial frictions featuring a banking sector, we explore the macroeconomic implications of various types of countercyclical bank capital regulations. Results suggest that countercyclical capital requirements have a significant stabilizing effect on key macroeconomic variables, but mostly after financial shocks.
Alternative Optimized Monetary Policy Rules in Multi-Sector Small Open Economies: The Role of Real RigiditiesInflation-targeting central banks around the world often state their inflation objectives with regard to the consumer price index (CPI). Yet the literature on optimal monetary policy based on models with nominal rigidities and more than one sector suggests that CPI inflation is not always the best choice from a social welfare perspective.
How Changes in Oil Prices Affect the MacroeconomyWe estimate a New Keynesian general-equilibrium open economy model to examine how changes in oil prices affect the macroeconomy. Our model allows oil price changes to be transmitted through temporary demand and supply channels (affecting the output gap), as well as through persistent supply side effects (affecting trend growth).
Globalization and Inflation: The Role of ChinaIn this paper, we develop a theoretical model which identifies four channels–import prices, competition with domestic suppliers and workers, and commodity prices–through which price- and wage-setting conditions in country j may affect inflation in country i.
The Welfare Implications of Fiscal DominanceThis paper studies the interdependence between fiscal and monetary policy in a DSGE model with sticky prices and non-zero trend inflation. We characterize the fiscal and monetary policies by a rule whereby a given fraction k of the government debt must be backed by the discounted value of current and future primary surpluses.
Cross-Country Estimates of the Degree of Fiscal Dominance and Central Bank IndependenceThis paper studies the interdependence between fiscal and monetary policies, and their joint role in the determination of the price level.
IMF-Supported Adjustment Programs: Welfare Implications and the Catalytic EffectThe author studies the welfare implications of adjustment programs supported by the International Monetary Fund (IMF). He uses a model where an endogenous borrowing constraint, set up by international lenders who will never lend more than a debt ceiling, forces the borrowing economy to always choose repayment over default.
Endogenous Borrowing Constraints and Consumption Volatility in a Small Open EconomyConsumption volatility relative to output volatility is consistently higher in emerging economies than in developed economies.
Bank of Canada Review articles
May 17, 2012
On the Adjustment of the Global EconomyThis article discusses three scenarios for the adjustment of the global economy. In a “baseline” scenario—which encompasses fiscal consolidation in major advanced economies, growth-friendly structural reforms in Europe and Japan, and greater exchange rate flexibility and reforms in the emerging-market economies of Asia to induce rotation of demand away from net exports—global current account imbalances […]
August 18, 2011