Macroprudential policy should aim for bank balance sheets that are larger and safer during normal times but smaller and riskier during financial crises. During recoveries from financial crises, monetary policy should complement macroprudential policy by being less expansive than what would be required to close the labour gap.
Firms are at the forefront of adopting new technology. Using survey data from a global network of central banks, we assess the effects of digitalization on firms’ pricing and employment decisions.
How Long is Forever in the Laboratory? Three Implementations of an Infinite-Horizon Monetary EconomyStandard monetary models adopt an infinite horizon with discounting. Testing these models in the lab requires implementing this horizon within a limited time frame. We compare three approaches to such an implementation and discuss their relative advantages.
We compare the determinants of consumer inflation expectations in the US and Canada by analyzing two current surveys. We find that Canadian consumers rely more on professional forecasts and the history of actual inflation when forming their expectations, while US consumers rely more on their own lagged expectations.
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.
We study the short-run effects of monetary policy using a search-theoretic monetary model in which agents are subject to idiosyncratic shocks and aggregate monetary shocks.
The goods and services sectors have experienced considerably different dynamics over the past three decades. Our goal in this paper is to understand how such contrasting behaviors at the sectoral level affect the aggregate level of trend inflation dynamics.
What do high-frequency expenditure network data reveal about spending and inflation during COVID‑19?The official consumer price index (CPI) inflation measure, based on a fixed basket set before the COVID 19 pandemic, may not fully reflect what consumers are currently experiencing. We partnered with Statistics Canada to construct a more representative index for the pandemic with weights based on real-time transaction and survey data.
Strengthening Inflation Targeting: Review and Renewal Processes in Canada and Other Advanced JurisdictionsWe summarize the review and renewal process at four central banks (Reserve Bank of New Zealand, Bank of England, Sveriges Riksbank and the US Federal Reserve Bank) and compare them with the process at the Bank of Canada, which has been well-established since 2001.
We introduce a new class of time-varying parameter vector autoregressions (TVP-VARs) where the identified structural innovations are allowed to influence — contemporaneously and with a lag — the dynamics of the intercept and autoregressive coefficients in these models.