Staff discussion papers
Staff working papers
Chinese Monetary Policy and Text Analytics: Connecting Words and DeedsWhat are the main drivers behind the monetary policy reaction function of the People’s Bank of China?
Can Media and Text Analytics Provide Insights into Labour Market Conditions in China?The official Chinese labour market indicators have been seen as problematic, given their small cyclical movement and their only-partial capture of the labour force. In our paper, we build a monthly Chinese labour market conditions index (LMCI) using text analytics applied to mainland Chinese-language newspapers over the period from 2003 to 2017.
How Fast Can China Grow? The Middle Kingdom’s Prospects to 2030Given its size and importance for global commodity markets, the question of how fast the Chinese economy can grow over the medium term is an important one. This paper addresses this question by examining the evolution of the supply side of the Chinese economy over history and projecting how it will evolve over the next 15 years.
Macroprudential Rules and Monetary Policy when Financial Frictions MatterThis paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as standard macroeconomic shocks.
The Transmission of Shocks to the Chinese Economy in a Global Context: A Model-Based ApproachTo better understand the dynamics of the Chinese economy and its interaction with the global economy, the authors incorporate China into an existing model for the G-3 economies (i.e., the United States, the euro area, and Japan), paying particular attention to modelling the exchange rate and monetary policy in China.
Multilateral Adjustment and Exchange Rate Dynamics: The Case of Three Commodity CurrenciesIn this paper, we empirically investigate whether multilateral adjustment to large U.S. external imbalances can help explain movements in the bilateral exchange rates of three commodity currencies – the Australian, Canadian and New Zealand (ACNZ) dollars.
Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical InvestigationThis paper investigates the question of whether a transition to a low-inflation environment, induced by a shift in monetary policy, results in a decline in the degree of pass-through of exchange rate movements to consumer prices.
Explaining and Forecasting Inflation in Emerging Markets: The Case of MexicoThe authors apply existing inflation models that have worked well in industrialized countries to Mexico, an emerging market that has recently moved to adopt an inflation-targeting framework for monetary policy. They compare the performance of these models with a mark-up model that has been used extensively to analyze inflation in Mexico.
Does Exchange Rate Policy Matter for Growth?Previous studies on whether the nature of the exchange rate regime influences a country's medium-term growth performance have been based on a tripartite classification scheme that distinguishes between pegged, intermediate, and flexible exchange rate regimes.
Private Capital Flows, Financial Development, and Economic Growth in Developing CountriesAn important issue in the debate over the desirability of freer capital mobility for developing countries is whether capital flows have significant effects on economic growth. Proponents of capital account liberalization cite the growth-promoting attributes of capital inflows as a key benefit of financial integration for developing countries.
Introducing the Bank of Canada's Projection Model for the Global EconomyTo complement its existing set of tools to analyze and forecast developments in the global economy, the Bank of Canada recently developed a version of the Global Projection Model (GPM) jointly with staff at the International Monetary Fund.
Bank of Canada Review articles
November 17, 2016
Structural Reforms and Economic Growth in Emerging-Market EconomiesGrowth has slowed in many emerging-market economies (EMEs) since the 2007–09 global financial crisis, reflecting both cyclical and structural factors. In this context, it will be in-creasingly important for EMEs to raise potential growth by maintaining steady progress on structural reforms. How do structural reforms generally support growth? What are the re-form priorities for EMEs over recent history and today? Finally, what will be the impact of planned structural reforms on potential output growth among the world’s larger EMEs? These are some of the questions considered by the authors.
February 23, 2012
Household Borrowing and Spending in CanadaUnderstanding how much of the increased debt load of Canadian households has been used to finance household spending on consumption and home renovation is important for the conduct of monetary policy. In this article, the authors use a comprehensive data set that provides information on the uses of debt by Canadian households. They first present some facts regarding the evolution of Canadian household debt over the period from 1999 to 2010, emphasizing the increased importance of debt flows that are secured by housing. They then explore how Canadian households have used their borrowed funds over the same period, and assess the role of these borrowed funds in financing total consumption and spending on home renovation. Finally, they examine the possible effects of a decline in house prices on consumption when housing equity is used as collateral against household indebtedness.
November 19, 2010
Has Exchange Rate Pass-Through Really Declined? Some Recent Insights from the LiteratureBuilding on an earlier Review article, the authors critically reassess the premise that exchange rate pass-through (ERPT) has declined in light of recent studies of the issue in the context of a dynamic stochastic general-equilibrium framework.
October 18, 2005
What Drives Movements in Exchange Rates?Understanding what causes the exchange rate to move has been on ongoing challenge for economists. Despite extensive research, traditional macro models of exchange rate determination—with the exception of the Bank of Canada's exchange rate equation—have typically not fared well, motivating economists to explore new ways to model exchange rate movements that incorporate more complex and realistic settings. Within the context of the sharp appreciation of the Canadian dollar in 2003 and 2004, Bailliu and King review the macroeconomic models of exchange rates, as well as the micro-structure studies that highlight the importance of trading mechanisms, information asymmetry, and investor heterogeneity for explaining short-term dynamics in exchange rates. In addition to summarizing the current state of knowledge, they highlight recent advances and identify promising alternative approaches.
May 22, 2004
Exchange Rate Pass-Through in Industrialized CountriesEconomists' long-standing interest in the degree to which exchange rate movements are reflected in prices was rekindled in the 1970s by a combination of rising inflation and the adoption of more flexible exchange rate regimes in many industrialized countries. Specifically, there were concerns that a large currency depreciation could degenerate into an inflationary spiral. Such fears were curtailed in the 1980s and early 1990s as industrialized countries began to reduce and stabilize their inflation rates. The low-inflation period most industrialized countries entered approximately a decade ago coincided with significant exchange rate depreciations that had much smaller effects on consumer prices than expected. This led to a belief that the extent to which exchange rate movements are passed through to consumer prices has declined. In this article, the authors examine why pass-through could be incomplete and review empirical estimates to determine whether pass-through has indeed declined, suggesting possible reasons for this decline and discussing the implications for monetary policy.
December 21, 2002