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December 8, 2022

Economic progress report: More transparency in uncertain times

Remarks Sharon Kozicki Urban Development Institute of Quebec Montréal, Quebec
Speaking a day after the Bank of Canada’s latest interest rate decision, Deputy Governor Sharon Kozicki discusses the current state of the economy and talks about how the Bank is improving both its use of data and the way we communicate with Canadians.

Harnessing the benefit of state-contingent forward guidance

Staff analytical note 2022-13 Vivian Chu, Yang Zhang
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.
August 18, 2002

The Role of Simple Rules in the Conduct of Canadian Monetary Policy

The third strategy employed by the Bank when dealing with uncertainty is the consideration of appropriate simple reaction functions or "rules" for the setting of the policy interest rate. Since John Taylor's presentation of his much-discussed rule, research on simple policy rules has exploded. Simple rules have several advantages. In particular, they are easy to construct and communicate and are believed by some to be robust, in the sense of generating good results in a variety of economic models. This article provides an overview of the recent research regarding the usefulness and robustness of simple monetary policy rules, particularly in models of the Canadian economy. It also describes and explains the role of simple rules in the conduct of monetary policy in Canada.
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