ToTEM III: The Bank of Canada’s Main DSGE Model for Projection and Policy Analysis Technical report No. 119 Paul Corrigan, Hélène Desgagnés, José Dorich, Vadym Lepetyuk, Wataru Miyamoto, Yang Zhang ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution. Content Type(s): Staff research, Technical reports Research Topic(s): Business fluctuations and cycles, Economic models, Housing, Interest rates, Monetary policy JEL Code(s): E, E1, E17, E2, E20, E3, E30, E4, E40, E5, E50, E6, E62, E65, F, F4, F40, F41, G, G5, G51 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
A New Measure of Monetary Policy Shocks Staff working paper 2021-29 Xu Zhang Combining various high frequency financial data with central bank projections, I construct a new measure of monetary policy shocks not predictable by the public information preceding a central bank’s announcements. I then study the causal effects of monetary policy on the macro economy. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Central bank research, Econometric and statistical methods, Interest rates, Monetary policy JEL Code(s): E, E5, G, G0 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation
Monetary Policy, Trends in Real Interest Rates and Depressed Demand Staff working paper 2021-27 Paul Beaudry, Césaire Meh Over the last few decades, real interest rates have trended downward. The most common explanation is that this reflects depressed demand due to demographic, technological and other real factors. We explore the claim that these trends may have been amplified by certain features of monetary policy. Content Type(s): Staff research, Staff working papers Research Topic(s): Debt management, Economic models, Fiscal policy, Inflation and prices, Interest rates, Monetary policy JEL Code(s): E, E2, E4, E43, E44, E5, E52, E6, E62, E63, H, H3, H6, H63 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting
The Geography of Pandemic Containment Staff working paper 2021-26 Elisa Giannone, Nuno Paixão, Xinle Pang Interconnectedness between US states has affected the evolution of the COVID-19 pandemic. We study the optimal containment policies regulating the movement of goods and people within and between states. Content Type(s): Staff research, Staff working papers Research Topic(s): Coronavirus disease (COVID-19), Economic models, Regional economic developments JEL Code(s): F, F1, H, H0, I, I1, R, R1 Research Theme(s): Financial system, Financial stability and systemic risk, Models and tools, Economic models, Monetary policy, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness
Shaping the future: Policy shocks and the GDP growth distribution Staff working paper 2021-24 Francois-Michel Boire, Thibaut Duprey, Alexander Ueberfeldt Can central bank and government policies impact the risks around the outlook for GDP growth? We find that fiscal stimulus makes strong GDP growth more likely—even more so when monetary policy is constrained—rather than weak GDP growth less likely. Thus, fiscal stimulus should accelerate the recovery phase of the COVID-19 pandemic. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Econometric and statistical methods, Financial stability, Fiscal policy, Monetary policy JEL Code(s): C, C3, C32, C5, C53, E, E5, E52, E6, E62 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Overlooking the online world: Does mismeasurement of the digital economy explain the productivity slowdown? Staff analytical note 2021-10 Alejandra Bellatin, Stéphanie Houle Since the mid-2000s, labour productivity has slowed down in Canada despite enormous technological advances that were expected to improve it. This note investigates whether mismeasurement of the digital economy can explain this paradox. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Productivity JEL Code(s): E, E0, E01, L, L8, L86, O, O3, O33, O4, O5, O51 Research Theme(s): Models and tools, Economic models, Structural challenges, Digitalization and productivity
Detecting exuberance in house prices across Canadian cities Staff analytical note 2021-9 Ugochi Emenogu, Cars Hommes, Mikael Khan We introduce a model to detect periods of extrapolative house price expectations across Canadian cities. The House Price Exuberance Indicator can be updated on a quarterly basis to support the Bank of Canada’s broader assessment of housing market imbalances. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Econometric and statistical methods, Financial stability, Housing JEL Code(s): C, C5, C53, R, R2, R21, R3, R31 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit, Models and tools, Economic models, Monetary policy, Real economy and forecasting
How Long is Forever in the Laboratory? Three Implementations of an Infinite-Horizon Monetary Economy Staff working paper 2021-16 Janet Hua Jiang, Daniela Puzzello, Cathy Zhang Standard 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. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Economic models, Inflation and prices JEL Code(s): C, C9, C92, D, D8, D83, E, E4, E40 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform Staff working paper 2021-15 Gabriela Galassi How do firms change their employment decisions when tax benefits for low-earning workers are expanded? Some firms increase employment overall, whereas others replace high-earning workers with low-earning workers, according to German linked employer-employee data. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Firm dynamics, Labour markets JEL Code(s): E, E2, E24, E6, E64, H, H2, H20, H24, H3, H32, I, I3, I38, J, J2, J23, J3, J38 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply
Occasionally Binding Constraints in Large Models: A Review of Solution Methods Staff discussion paper 2021-5 Jonathan Swarbrick Solving macroeconomic models is difficult. One challenge is the occasionally binding constraint of the zero lower bound on nominal interest rates. This paper reviews various ways to solve models that include this feature. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): C, C6 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission