Yang Zhang is the Director of the Model Development Division of the Canadian Economic Analysis (CEA) department, effective since October 2019. In this capacity, she leads efforts to develop and integrate state-of-the-art economic models for the analysis of the Canadian economy and for providing monetary policy advice. Her responsibilities include leading high-quality research that supports the renewal of the Bank’s monetary policy framework. In this position, Ms. Zhang also collaborates closely with the academic and the international central banking communities. She is involved in the development of the next generation of Bank’s monetary policy models.
Ms. Zhang joined the Bank in 2007 as an Economist in the Canadian Projection & Policy Analysis Division of CEA. In this role she provided key inputs into the Staff Economic Projection, produced risk analyses as well as contributed to policy discussions. In 2009, she became a Senior Economist in the Model Development Division and held increasingly senior positions, recently as the Principal Economist of the team.
Ms. Zhang has deep knowledge and expertise in model development and monetary policy analysis. Her recent work focuses on modelling unconventional monetary policies and alternative expectation formations in DSGE models and the development of Agent-Based models. She also conducts research to support social good such as health and economic equality, using advanced computational methods including machine learning and artificial intelligence.
Born in China, Ms. Zhang holds a PhD in Economics from University of Ottawa.
Staff analytical notes
A low level of the neutral rate of interest increases the likelihood that a central bank’s policy rate will reach its effective lower bound (ELB) in future economic downturns. In a low neutral rate environment, using an extended monetary policy toolkit including forward guidance helps address the ELB challenge. Using the Bank’s Terms-of-Trade Economic Model, we assess the benefits and limitations of a state-contingent forward guidance implemented within a flexible inflation targeting framework.
Staff discussion papers
We introduce bounded rationality in a canonical New Keynesian model calibrated to match Canadian macroeconomic data since Canada’s adoption of inflation targeting. We use the model to quantitatively assess the macroeconomic impact of alternative monetary policy regimes.
Bank of Canada staff are running a “horse race” of alternative monetary policy frameworks in the lead-up to 2021 renewal of the Bank’s monetary policy framework. This paper summarizes some interim results of model simulations from their research.
In this analysis, we use simulations in the Bank of Canada’s projection model—the Terms-of-Trade Economic Model—to consider a suite of extended monetary policies to support the economy following the COVID-19 crisis.
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
Consumption inequality and a low interest rate environment are two important trends in today’s economy. But the implications they may have—and how those implications interact—within different monetary policy frameworks are not well understood. We study the ranking of alternative frameworks that take these trends into account.
ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution.
This report provides a detailed technical description of an updated version of the Terms-of-Trade Economic Model (ToTEM II), which replaced ToTEM (Murchison and Rennison 2006) in June 2011 as the Bank of Canada’s quarterly projection model for Canada.
Bank of Canada Review articles
August 18, 2011
This article describes changes to the structure of ToTEM—the Bank of Canada’s main model for projection and policy analysis—that allow an independent role for long-term interest rates, as well as for the risk spreads that lead to differences in the interest rates faced by households, firms and the government. These changes broaden the range of policy questions that the model can address and improve its ability to explain data. The authors use the model to simulate the effects of shocks to the risk spreads on interest rates similar to those that occurred during the recent financial crisis. They also use the model to assess the macroeconomic impact of higher requirements for bank capital and liquidity.