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276 Results

Monetary Policy, Credit Constraints and SME Employment

Staff Working Paper 2022-49 Julien Champagne, Émilien Gouin-Bonenfant
We revisit an old question: how do financial constraints affect the transmission of monetary policy to the real economy? To answer this question, we propose a simple empirical strategy that combines firm-level employment and balance sheet data, identified monetary policy shocks and survey data on financing activities.
November 10, 2022

Getting back to stable prices and a balanced jobs market

Speech summary Tiff Macklem Public Policy Forum Toronto, Ontario
Governor Tiff Macklem discusses the relationship between inflation and employment and how the Bank of Canada is working to cool an overheated economy.
November 10, 2022

Restoring labour market balance and price stability

Remarks Tiff Macklem Public Policy Forum Toronto, Ontario
Governor Tiff Macklem outlines the link between high inflation and tight labour markets. He explains how the Bank is working to rebalance the labour market and discusses how structural changes may influence the supply of workers in Canada.

Stagflation and Topsy-Turvy Capital Flows

Staff Working Paper 2022-46 Julien Bengui, Louphou Coulibaly
Unregulated capital flows are likely excessive during a stagflation episode, owing to a macroeconomic externality operating through the economy’s supply side. Inflows raise domestic wages and cause unwelcome upward pressure on firm costs, yet market forces likely generate such inflows. Optimal capital flow management instead requires net outflows.

Core inflation over the COVID-19 pandemic

Staff Analytical Note 2022-17 Mikael Khan, Elyse Sullivan
We assess the usefulness of various measures of core inflation over the COVID-19 pandemic. We find that Cpi-trim and CPI-median provided the best signal of underlying inflation. The favourable performance of these measures stems from their lack of reliance on historical experience, an especially valuable feature in unprecedented times.
October 6, 2022

What’s happening to inflation and why it matters

Remarks Tiff Macklem Halifax Chamber of Commerce Halifax, Nova Scotia
Governor Tiff Macklem discusses how inflation has evolved in recent months and explains what the Bank is watching as it takes action to return inflation to target.
October 6, 2022

Restoring price stability for all Canadians

Speech summary Tiff Macklem Halifax Chamber of Commerce Halifax, Nova Scotia
Governor Tiff Macklem explains how inflation in Canada reflects more and more what’s happening with domestic demand and what the Bank is watching as it works to bring inflation back to the 2% target.

Behavioral Learning Equilibria in New Keynesian Models

Staff Working Paper 2022-42 Cars Hommes, Kostas Mavromatis, Tolga Özden, Mei Zhu
We introduce behavioral learning equilibria (BLE) into DSGE models with boundedly rational agents using simple but optimal first order autoregressive forecasting rules. The Smets-Wouters DSGE model with BLE is estimated and fits well with inflation survey expectations. As a policy application, we show that learning requires a lower degree of interest rate smoothing.

How does the Bank of Canada’s balance sheet impact the banking system?

Staff Analytical Note 2022-12 Daniel Bolduc-Zuluaga, Brad Howell, Grahame Johnson
We examine how changes in the Bank of Canada’s balance sheet impact the banking system. Quantitative easing contributed to an increase in the size of the banking system’s balance sheet and an improvement in bank liquidity coverage ratios. Quantitative tightening is expected to partially reverse these impacts. The banking system will have to adjust its liquidity management strategy in response.

The Central Bank’s Dilemma: Look Through Supply Shocks or Control Inflation Expectations?

Staff Working Paper 2022-41 Paul Beaudry, Thomas J. Carter, Amartya Lahiri
When countries are hit by supply shocks, central banks often face the dilemma of either looking through such shocks or reacting to them to ensure that inflation expectations remain anchored. In this paper, we propose a tractable framework to capture this dilemma and then explore optimal policy under a range of assumptions about how expectations are formed.
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