There are indications that business dynamism has declined in advanced economies. In particular, firm entry and exit rates have fallen, suggesting that the creative destruction process has lost some of its vitality. Meanwhile, productivity growth has slowed. Some believe that lower entry and exit rates partly explain the weaker productivity growth.
We use a new real-time database for Canada to study various output gap measures. This includes recently developed measures based on models incorporating many variables as inputs (and therefore requiring real-time data for many variables).
This note summarizes the Bank of Canada’s 2016 annual reassessment of potential output growth, which is projected to be 1.5 per cent over 2016–18 and 1.6 per cent in 2019–20. This projection is weaker than the one presented in the April 2015 Monetary Policy Report.
There is widespread agreement that, in the United States, higher house prices raise consumption via collateral or possibly wealth effects. The presence of similar channels in Canada would have important implications for monetary policy transmission.
Recently released data show downward trends for both the firm entry rate and the rate of new entrepreneurship since the early 1980s in Canada. This paper documents these trends and discusses potential explanations.
"Optimum Currency Areas as Applied to Canada and the United States" (with C. Dupasquier and R. Lalonde). In Exchange rates and monetary policy. Proceedings of a conference held by the Bank of Canada, October 1996, p.131–170. (1997).
"Trends in Firm Entry and New Entrepreneurship in Canada" (with Shutao Cao, Mohanad Salameh and Mai Seki) Canadian Public Policy, Vol. 43, No. 3, pp. 202-220, September 2017.
"A Comparison of Twelve Macroeconomic Models of the Canadian Economy." (with Denise Côté, Jean Paul Lam, John Kuszczak, and Ying Liu) Journal of Policy Modeling 28 (5) July 2006.
"The Performance and Robustness of Simple Monetary Policy Rules in Models of the Canadian Economy" (with Denise Côté, Jean Paul Lam, John Kuszczak, and Ying Liu) Canadian Journal of Economics 37 (4) November 2004.
"Do the Hodrick-Prescott and Baxter-King Filters Provide a Good Approximation of Business Cycles?" (with A. Guay). Annales d'Économie et de Statistique (77) January-March 2005.
"Revisiting the case for flexible exchange rates in North America," (with John Murray and Lawrence Schembri). North American Journal of Economics and Finance, 14 (2), August 2003, p.207-240.
"Zones monétaires optimales : Revue de la littérature récente," (with Robert Lafrance) L'Actualité Économique. Décember 2000.
"Résultats empiriques multi-pays relatifs à limpact des cibles dinflation sur la crédibilité de la politique monétaire." (with David Tessier). Canadian Public Policy. Summer 2000.
"A Comparison of Alternative Methodologies for Estimating Potential Output and the Output Gap." (with Chantal Dupasquier and Alain Guay). Journal of Macroeconomics, 21, 1999.
"Déflation et Politique Monétaire" (with David Tessier). L’Actualité économiques, September 2008.
"Optimum Currency Areas as Applied to Canada and the United States." (with C. Dupasquier and R. Lalonde). Money Affairs, 11 (1). Also published in Monetaria. 1998.
"Measurement of the Output Gaps: A Discussion of Recent Research at the Bank of Canada." (with Simon van Norden). BIS Conference Papers 4, 1997.
"Optimal Currency Areas: The Case of Mexico and the United States." (with René Lalonde). Money Affairs, 8 (2). Also published in Monetaria. 1995.
Workshop papers on Taylor Rules held 25 October 2001 at the Bank of Canada (preliminary versions available).