How Do Central Bank Projections and Forward Guidance Influence Private-Sector Forecasts? Staff working paper 2018-2 Monica Jain, Christopher S. Sutherland 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. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, D83, E, E3, E37, E5, E52, E58 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation, Real economy and forecasting
Credit Crunches from Occasionally Binding Bank Borrowing Constraints Staff working paper 2017-57 Tom D. Holden, Paul Levine, Jonathan Swarbrick We present a model in which banks and other financial intermediaries face both occasionally binding borrowing constraints and costs of equity issuance. Near the steady state, these intermediaries can raise equity finance at no cost through retained earnings. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E22, E3, E32, E5, E51, G, G2 Research Theme(s): Financial system, Financial institutions and intermediation, Household and business credit, Models and tools, Economic models
Recent Evolution of Canada’s Credit-to-GDP Gap: Measurement and Interpretation Staff analytical note 2017-25 Timothy Grieder, Dylan Hogg, Thibaut Duprey Over the past several years, the Bank for International Settlements has noted that Canada’s credit-to-GDP gap has widened and is above thresholds indicating future banking stress. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D1, E, E3, E32, G, G0, G01, G1, G2, G21, G3, G30 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit
A Barometer of Canadian Financial System Vulnerabilities Staff analytical note 2017-24 Thibaut Duprey, Tom Roberts This note presents a composite indicator of Canadian financial system vulnerabilities—the Vulnerabilities Barometer. It aims to complement the Bank of Canada’s vulnerabilities assessment by adding a quantitative and synthesized perspective to the more granular (distributional) analysis presented in the Financial System Review. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C1, C14, C4, C40, D, D1, D14, E, E3, E32, E6, E66, F, F0, F01, G, G0, G01, G1, G15, G2, G21, H, H6, H63 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial stability and systemic risk, Household and business credit, Models and tools, Econometric, statistical and computational methods
Evaluating Real GDP Growth Forecasts in the Bank of Canada Monetary Policy Report Staff analytical note 2017-21 André Binette, Dmitri Tchebotarev This paper examines the quality of projections of real GDP growth taken from the Bank of Canada Monetary Policy Report (MPR) since they were first published in 1997. Over the last decade, it has become common practice among the central banking community to discuss forecast performance publicly. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C5, C52, E, E3, E32, E37, E5, E52 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Real economy and forecasting
Understanding the Time Variation in Exchange Rate Pass-Through to Import Prices Staff discussion paper 2017-12 Rose Cunningham, Min Jae Kim, Christian Friedrich, Kristina Hess In this paper, we analyze the presence of time variation in the pass-through from the nominal effective exchange rate to import prices for 24 advanced economies over the period 1995–2015. In line with earlier studies in the literature, we find substantial heterogeneity in the level of exchange rate pass-through across countries. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E3, E31, F, F3, F31, F4, F41 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Structural challenges, International trade, finance and competitiveness
Digitalization and Inflation: A Review of the Literature Staff analytical note 2017-20 Karyne B. Charbonneau, Alexa Evans, Subrata Sarker, Lena Suchanek In the past few years, many have postulated that the possible disinflationary effects of digitalization could explain the subdued inflation in advanced economies. In this note, we review the evidence found in the literature. We look at three main channels. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D2, D22, E, E3, E31, L, L8, L81, O, O3, O33 Research Theme(s): Financial markets and funds management, Market structure, Monetary policy, Inflation dynamics and pressures, Structural challenges, Digitalization and productivity
Digital Transformation in the Service Sector: Insights from Consultations with Firms in Wholesale, Retail and Logistics Staff analytical note 2017-19 Wei Dong, James Fudurich, Lena Suchanek Firms increasingly rely on digital technologies such as e-commerce, cloud computing, big data, digital tracking and digital platforms that are reshaping business operations, business models and market structures. In this context, the Bank of Canada consulted with firms in wholesale, retail and logistics, as well as with related industry associations to yield insights on the adoption of digital technologies. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D2, D22, E, E3, E31, L, L8, L81, L9, L92, O, O3, O33 Research Theme(s): Financial markets and funds management, Market structure, Monetary policy, Inflation dynamics and pressures, Structural challenges, Digitalization and productivity
Global Factors and Inflation in Canada Staff analytical note 2017-17 Dany Brouillette, Laurence Savoie-Chabot This note investigates whether the recent weakness in inflation in Canada can be related to global factors not included in the current staff analytical framework (domestic slack, movements in commodity prices and in the exchange rate). A global common factor for inflation among selected advanced economies appears to contain marginal information for Canadian inflation beyond what is found in movements in commodity prices and the exchange rate. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, E31 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Structural challenges, International trade, finance and competitiveness
Low Inflation in Advanced Economies: Facts and Drivers Staff analytical note 2017-16 Sanjana Bhatnagar, Anne-Katherine Cormier, Patrisha de Leon-Manlagnit, Elise Martin, Vikram Rai, Renaud St-Cyr, Subrata Sarker, Kristina Hess Since the global financial crisis, core inflation has been persistently below target in most advanced economies. Recently, it has weakened further in several advanced economies despite gradually diminishing slack. This note reviews recent developments in core inflation across advanced economies and identifies distinctive patterns across regions. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E0, E3, E31, F, F0 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Real economy and forecasting