Oleksiy Kryvtsov is the Senior Research Officer in the Economic and Financial Research Department. His research interests center on business cycle fluctuations, with a special focus on monetary theory and policy. Oleksiy contributed to topics including consumer price behaviour, real effects of monetary policy shocks, dynamics of markups and costs over the business cycle. Oleksiy received his PhD in Economics from the University of Minnesota in 2004.
Staff discussion papers
From 2011 to 2019, inflation in Canada and advanced economies usually registered below inflation targets, spurring the debate on whether the inflation process has changed. This paper highlights emerging questions that will influence the conduct of monetary policy in Canada in the near term.
This note examines the merits of monetary policy adjustments in response to financial stability concerns, taking into account changes in the state of knowledge since the renewal of the inflation-targeting agreement in 2011. A key financial system vulnerability in Canada is elevated household indebtedness: as more and more households are nearing their debt-capacity limits, the likelihood and severity of a large negative correction in housing markets are also increasing.
Bank of Canada research done prior to the most recent renewal of the inflation-control agreement in 2011 concluded that the benefits associated with a target below 2 per cent were insufficient to justify the increased risk of being constrained by the zero lower bound (ZLB) on nominal interest rates.
Because financial and macroeconomic conditions are tightly interconnected, financial stability considerations are an important element of any monetary policy framework. Yet, the circumstances under which it would be appropriate for the Bank to use monetary policy to lean against financial risks need to be more fully specified (Côté 2014).
ToTEM – the Bank of Canada’s principal projection and policy-analysis model for the Canadian economy – is extended to include inventories. In the model, firms accumulate inventories of finished goods for their role in facilitating the demand for goods.
Inventory investment is an important component of the Canadian business cycle. Despite its small average size – less than 1 per cent of output – it exhibits volatile procyclical fluctuations, accounting for almost one-third of output variance.
Staff working papers
Standard theories of price adjustment are based on the problem of a single-product firm, and therefore they may not be well suited to analyze price dynamics in the economy with multiproduct firms.
We use controlled laboratory experiments to test the causal effects of central bank communication on economic expectations and to distinguish the underlying mechanisms of those effects. In an experiment where subjects learn to forecast economic variables, we find that central bank communication has a stabilizing effect on individual and aggregate outcomes and that the size of the effect varies with the type of communication.
We propose a simple, model-free way to measure selection in price setting and its contribution to inflation dynamics. The proposed measure of price selection is based on the observed comovement between inflation and the average level from which adjusting prices depart.
We propose a functional principal components method that accounts for stratified random sample weighting and time dependence in the observations to understand the evolution of distributions of monthly micro-level consumer prices for the United Kingdom (UK).
Macroeconomists have traditionally ignored the behavior of temporary price markdowns (“sales”) by retailers. Although sales are common in the micro price data, they are assumed to be unrelated to macroeconomic phenomena and generally filtered out.
The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business-cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and the output gap by at least two-thirds.
Rising consumer prices may reflect shifts by consumers to new higher-priced products, mostly for durable and semi-durable goods. I apply Bils’ (2009) methodology to newly available Canadian consumer price data for non-shelter goods and services to estimate how price increases can be divided between quality growth and price inflation.
Recent New Keynesian models of macroeconomy view nominal cost rigidities, rather than nominal price rigidities, as the key feature that accounts for the observed persistence in output and inflation. Kryvtsov and Midrigan (2010a,b) reassess these conclusions by combining a theory based on nominal rigidities and storable goods with direct evidence on inventories for the U.S.
Using the Bank of Canada's main projection and policy-analysis model, ToTEM, this paper measures the welfare gains of switching from inflation targeting to price-level targeting under imperfect credibility. Following the policy change, private agents assign a probability to the event that the policy-maker will revert to inflation-targeting next period.
Models with imperfect information that generate persistent monetary nonneutrality predominantly rely on assumptions leading to substantial heterogeneity of information across price-setters. This paper develops a quantitative general equilibrium model in which the degree of heterogeneity of information is determined endogenously.
Bank of Canada Review articles
November 13, 2014
This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted by Bank of Canada economists has shed light on a number of issues important to monetary policy, such as the relative efficacy between price-level and inflation targeting, and the nature of inflation expectations formation.
- “CentralBank Communication That Works: Lessons from Lab Experiments,”
(with Luba Petersen), May 2020. Forthcoming, Journal of Monetary Economics.
- “The Cyclicality of Sales and Aggregate Price Flexibility,”
(with Nicolas Vincent), February 2020. Forthcoming, Review of Economic Studies.
- “On the Evolution of the United Kingdom Price Distributions,”
(with Ba M. Chu, David T. Jacho-Chavez, and Kim P. Huynh), Annals of Applied Statistics, vol. 1(4), 2018, pages 2618–2646.
- "Is There a Quality Bias in the Canadian CPI? Evidence from Micro Data," Canadian Journal of Economics, vol. 49(4), November 2016, pages 1401-1424.
- "The evolution of firm-level distributions for Ukrainian manufacturing firms,"
(with Kim P. Huynh, David T. Jacho-Chávez, Oleksandr Shepotylo, Volodymyr Vakhitov), Journal of Comparative Economics, Elsevier, vol. 44(1), February 2016, pages 148-162.
- "Inventories, Markups and Real Rigidities in Menu Cost Models,"
(with Virgiliu Midrigan), Review of Economic Studies, Oxford University Press, vol. 80(1), 2013, pages 249-276.
- "Optimal Monetary Policy under Incomplete Markets and Aggregate Uncertainty: A Long- Run Perspective,"
(with Malik Shukayev and Alexander Ueberfeldt), Journal of Economic Dynamics and Control, vol. 35(7), pages 1045-1060, July 2011.
- "Inventories and Real Rigidities in New Keynesian Business Cycle Models,"
(with Virgiliu Midrigan), Journal of Japanese and International Economies 24(2), June 2010, 259-281.
- "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?",
(with Pete Klenow), Quarterly Journal of Economics 123, August 2008, 863-904.
- "Sticky Prices and Monetary Policy Shocks,"
(with Mark Bils and Pete Klenow), Federal Reserve Bank of Minneapolis Quarterly Review 27:1, Winter 2003: 2-9.