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The Risk Amplification Macro Model (RAMM) is a new nonlinear two-country dynamic model that captures rare but severe adverse shocks. The RAMM can be used to assess the financial stability implications of both domestic and foreign-originated risk scenarios.

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Ready References

The book is part of the National Currency Collection, Bank of Canada.
Photography by Gord Carter, Ottawa.

Economists disagree about the factors driving the substantial increase in residual wage inequality in the United States over the past few decades. To identify changes in the returns to unobserved skills, we make a novel assumption about the dynamics of skills (especially among older workers) rather than about the stability of skill distributions across cohorts, as is standard.

This paper documents a link between the real and financial sides of the economy. We find that retail equity mutual fund flows in Canada are negatively related to current and past changes in a component of the prime and 5-year mortgage rates that is uncorrelated with government rates.

How do banks adjust their loan rate markup in response to macroeconomic shocks?

We study how different types of monetary policy shape the distributional effects of external economic shocks on households’ consumption in a small open economy. Our results present a trade-off between maintaining overall stabilization and controlling consumption inequality.

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.

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Moroccan Coin Moulds

This bronze mould from Morocco is part of the National Currency Collection, Bank of Canada.
Photography by Gord Carter, Ottawa.