Staff discussion papers

This paper quantifies the contribution of human capital accumulation to the growth of real gross domestic product (GDP) in Canada.

We break down the exchange rate based on an explicit link between fixed income and currency markets. We isolate a foreign exchange risk premium and show it is the main driver of the exchange rate between the Canadian and US dollars, especially on monetary policy and macroeconomic news announcement days.

We assess the impact of COVID-19 on consumption indicators by estimating the effects of government-mandated containment measures and of the willingness of individuals to voluntarily physically distance to prevent contagion.

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.

We study the impact of the Bank of Canada’s choice of settlement mechanism in Lynx on participant behaviors, liquidity usage, payment delays and the overall operational efficiency of the new system.

The theory that rich economic diversity of businesses and households both affects and is shaped by economy-wide fluctuations has strong implications for monetary policy. This review places these insights in a Canadian context.

Climate transition scenarios clarify climate-related risks to our economy and financial system. This paper summarizes key results of Canada-relevant scenarios developed in a pilot project on climate risk by the Bank of Canada and the Office of the Superintendent of Financial Institutions.

One argument for central bank digital currencies (CBDCs) is that without them, private and foreign digital monies could displace domestic currencies, threatening the central bank’s monetary policy and lender of last resort capabilities. I revisit this monetary sovereignty rationale and offer a wider view—one that considers a broader set of currency functions and captures important cross-country variation.

We update the Bank of Canada’s credit rating methodology for sovereigns, including our approach to assessing their fiscal position and monetary policy flexibility. We also explicitly consider climate-related factors.

Measuring labour market slack is essential for central banks: without full employment in the economy, inflation will not stay close to target. We propose a comprehensive approach to assessing labour market slack that reflects the complexity and diversity of the labour market.