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This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

This newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

We investigate the effect of inflation on output and welfare in the laboratory. Consistent with monetary theory, we find that inflation acts as a tax on monetary exchange and reduces output and welfare.

In this issue, Bank staff discuss recent developments in experimental macroeconomics, research results on price-level and unemployment thresholds in forward guidance, and the spillover effects of quantitative easing in advance economies. Articles also explore the competitiveness strategies of Canadian firms as well as their use of financial derivatives.

This newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

How should central banks design monetary policy in stable times and during recessions? We run a horse race between five monetary policy frameworks in an experimental laboratory to assess how well the different approaches can manage the public’s expectations and stabilize the economy.

We construct a 23-country panel data set to consider the effect of central bank projections and forward guidance on private-sector forecast disagreement. We find that central bank projections and forward guidance matter mainly for private-sector forecast disagreement surrounding upcoming policy rate decisions and matter less for private-sector macroeconomic forecasts.

Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations.

Monetary theory says that money is essential if it helps to achieve better incentive-feasible outcomes. We test this in the laboratory.

We examine the value of direct communication to households about inflation and the uncertainty around inflation statistics. All types of information about inflation are effective at immediately managing inflation expectations, with information about outlooks being more effective and relevant than that about recent inflation and Bank targets.