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This paper analyzes the optimal quantity of central bank reserves in an economy where reserves and other financial assets provide liquidity benefits. Using a static model, I derive a constrained Friedman rule that characterizes the socially optimal level of reserves, demonstrating that this quantity is neither necessarily large nor small but depends on the marginal benefits of reserves relative to alternative safe assets.

Changes in the term premium can reflect uncertainty about inflation, growth and monetary policy. Understanding the key factors that influence the term premium is important when central banks make decisions about monetary policy. In this paper, we derive the real term premium from the nominal term premium in Canada.

I quantify the importance of changes in household preferences on household inflation rates using 11 years of scanner data for 11,000 US households. My results suggest that changes in household preferences are an important driver of inflation dynamics at the household level.

We conduct surveys to study how consumer spending responds to higher inflation expectations. Most respondents spend the same, sticking to fixed budget plans or not considering inflation for spending decisions. About 20% decrease spending because they feel poorer and cut spending to invest in inflation-proof assets. Very few increase spending.

We analyze the transmission of monetary policy during different phases of a sectoral demand reallocation episode when there are frictions to increasing production in a sector. Monetary policy is more effective in reducing inflation when a larger proportion of sectors are expanding or expect to expand in the near future.

We analyze the dynamic and heterogeneous responses of small-business loan performance to a monetary-policy shock using loan-level data in Canada. We find evidence of monetary policy transmission through the cash-flow channel and the aggregate demand channel as well as some, though limited, impact of collateral to discipline loan repayment.

We explore the long-run effects of a monetary policy shock in a Heterogeneous Agent New Keynesian model built on the micro evidence that job losses lead to persistently lower individual earnings through a combination of skill decay and abandonment of the labour force.

We examine different monetary policy governance structures and discuss the important roles of non-legislated processes and practices. We also provide an update on monetary policy governance at the Bank of Canada and how it has evolved over time.

On May 27, 2024, the settlement period for trading GoC bonds in the secondary market in Canada moved from two days to one. This shortened time for settling secondary cash bond trades caused CORRA volumes to rise significantly, and they have remained elevated since. This combined with the skew in demand for funding has pressured CORRA higher. We find no indications that any other factors are contributing to the most recent pressures on CORRA.

How does the transmission of monetary policy change when a central bank digital currency (CBDC) is introduced in the economy? Does CBDC design matter? We study these questions in a general equilibrium model with nominal rigidities, liquidity frictions, and a banking sector where commercial banks face a leverage constraint.