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321 result(s)

Exploring the potential benefits of inflation overshooting

Staff Analytical Note 2021-16 Robert Amano, Marc-André Gosselin, Kurt See
After a period with the interest rate at the effective lower bound, temporarily overshooting inflation may offer important economic benefits. This may be especially true for vulnerable segments of the population, such as workers with low attachment to the labour force and the long-term unemployed.
Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation targets, Labour markets, Monetary policy, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52, J, J2, J20

Sequencing Extended Monetary Policies at the Effective Lower Bound

Staff Discussion Paper 2021-10 Yang Zhang, Lena Suchanek, Jonathan Swarbrick, Joel Wagner, Tudor Schlanger
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.
Content Type(s): Staff research, Staff discussion papers Topic(s): Coronavirus disease (COVID-19), Monetary policy, Monetary policy transmission JEL Code(s): E, E3, E4, E5, E52, E58

The Side Effects of Safe Asset Creation

Staff Working Paper 2021-34 Sushant Acharya, Keshav Dogra
The secular decline in real interest rates has created a challenge for monetary policy, now confronting the zero lower bound more often. An increase in the supply of safe assets reduces downward pressure on the natural interest rate. This allows monetary policy to reach price stability and full employment, but not without cost—permanently lower investment.
Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Monetary policy implementation JEL Code(s): E, E3, E4, E5, G, G1, H, H6

Secular Economic Changes and Bond Yields

Staff Working Paper 2021-14 Bruno Feunou, Jean-Sébastien Fontaine
We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant
Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Interest rates, Monetary policy and uncertainty, Potential output JEL Code(s): E, E4, E43, G, G1, G12

Monetary Policy Pass-Through with Central Bank Digital Currency

Staff Working Paper 2021-10 Janet Hua Jiang, Yu Zhu
Many central banks are considering issuing a central bank digital currency (CBDC). This would introduce a new policy tool—interest on CBDC. We investigate how this new tool would interact with traditional monetary policy tools, such as the interest on central bank reserves.
Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Monetary policy transmission JEL Code(s): E, E5, E50, E52

(Optimal) Monetary Policy with and without Debt

Staff Working Paper 2021-5 Boris Chafwehé, Rigas Oikonomou, Romanos Priftis, Lukas Vogel
How should policy be designed at high debt levels, when fiscal authorities have little room to adjust taxes? Assigning the monetary authority a role in achieving debt sustainability makes it less effective in stabilizing inflation and output.
Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Fiscal policy, Monetary policy, Monetary policy framework JEL Code(s): C, C1, C11, E, E3, E31, E5, E52, E58, E6, E62

Networking the Yield Curve: Implications for Monetary Policy

Staff Working Paper 2021-4 Tatjana Dahlhaus, Julia Schaumburg, Tatevik Sekhposyan
We study how different monetary policies affect the yield curve and interact. Our study highlights the importance of the spillover structure across the yield curve for policy-making.
Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Interest rates, Monetary policy implementation JEL Code(s): C, C1, C18, C2, C21, C5, C53, E, E4, E43, E44, E5, E52

Qualitative Field Research in Monetary Policy Making

Staff Discussion Paper 2021-1 Chris D'Souza, Jane Voll
Central banks conduct research involving in-depth interviews with external parties—but little is known about how this information affects monetary policy. We address this gap by analyzing open-ended interviews with senior central bank economic and policy staff who work closely with policy decision-makers.
Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Monetary policy, Monetary policy and uncertainty JEL Code(s): C, C8, C83, E, E3, E37, E5, E52

Implementation and Effectiveness of Extended Monetary Policy Tools: Lessons from the Literature

Staff Discussion Paper 2020-16 Grahame Johnson, Sharon Kozicki, Romanos Priftis, Lena Suchanek, Jonathan Witmer, Jing Yang
This paper summarizes the literature on the performance of various extended monetary policy tools when conventional policy rates are constrained by the effective lower bound. We highlight issues that may arise when these tools are used by central banks of small open economies.
Content Type(s): Staff research, Staff discussion papers Topic(s): Monetary policy, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E5, E52, E58, E6, E63