The Impact of a Trade War: Assessment of the Current Tariffs and Alternative Scenarios Staff Analytical Note 2019-20 Karyne B. Charbonneau This note uses Charbonneau and Landry’s (2018) framework to assess the direct impact of the current trade tensions on the Canadian and global economies, as well as possible implications if the conflict escalates further. Overall, my findings show that the estimated impact of current tariffs on real gross domestic product (GDP) remains relatively small, which is in line with the literature on gains from trade, but the impact on trade is much larger. Content Type(s): Staff research, Staff analytical notes Topic(s): Recent economic and financial developments, Trade integration JEL Code(s): F, F1, F11, F13, F14, F15, F5, F50, F6, F62, F68
Reassessing Trade Barriers with Global Value Chains Staff Working Paper 2019-19 Yuko Imura This paper provides a systematic, quantitative analysis of the short-run and long-run effects of various trade-restricting policies in the presence of global value chains and multinational production. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Firm dynamics, International topics, Trade integration JEL Code(s): F, F1, F12, F13, F4, F41
Estimating the Effect of Exchange Rate Changes on Total Exports Staff Working Paper 2019-17 Thierry Mayer, Walter Steingress This paper shows that real effective exchange rate (REER) regressions, the standard approach for estimating the response of aggregate exports to exchange rate changes, imply biased estimates of the underlying elasticities. We provide a new aggregate regression specification that is consistent with bilateral trade flows micro-founded by the gravity equation. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Exchange rates, International topics JEL Code(s): F, F1, F11, F12, F3, F31, F32
The Neutral Rate in Canada: 2019 Update Staff Analytical Note 2019-11 Thomas J. Carter, Xin Scott Chen, José Dorich This note provides an update on Bank of Canada staff’s assessment of the Canadian neutral rate. The neutral rate is the policy rate needed to keep output at its potential level and inflation at target once the effects of any cyclical shocks have dissipated. This medium- to long-run concept serves as a benchmark for gauging the degree of monetary stimulus provided by a given policy setting. Content Type(s): Staff research, Staff analytical notes Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41
Labor Mobility in a Monetary Union Staff Working Paper 2019-15 Daniela Hauser, Martin Seneca The optimal currency literature has stressed the importance of labor mobility as a precondition for the success of monetary unions. But only a few studies formally link labor mobility to macroeconomic adjustment and policy. In this paper, we study macroeconomic dynamics and optimal monetary policy in an economy with cyclical labor flows across two distinct regions that share trade links and a common monetary framework. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Labour markets, Monetary policy framework, Regional economic developments JEL Code(s): E, E3, E32, E5, E52, F, F4
Drivers of Weak Wage Growth in Advanced Economies Staff Analytical Note 2019-3 Anne-Katherine Cormier, Michael Francis, Kristina Hess, Guillaume Poulin-Bellisle Since the global financial crisis, advanced-economy wage growth has been generally low relative to past recoveries, especially after accounting for the evolution of labour market conditions over this period. This paper investigates a variety of potential explanations for this weakness, drawing on findings from the literature as well as analysis of recent labour market data in advanced economies. Content Type(s): Staff research, Staff analytical notes Topic(s): International topics, Labour markets JEL Code(s): E, E3, E31, F, F0, J, J3
The Distributional Effects of Conventional Monetary Policy and Quantitative Easing: Evidence from an Estimated DSGE Model Staff Working Paper 2019-6 Stefan Hohberger, Romanos Priftis, Lukas Vogel This paper compares the distributional effects of conventional monetary policy and quantitative easing (QE) within an estimated open-economy DSGE model of the euro area. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Interest rates, Monetary policy, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E52, F, F4, F41
The Impact of Surprising Monetary Policy Announcements on Exchange Rate Volatility Staff Analytical Note 2018-39 Adam Albogatchiev, Jean-Sébastien Fontaine, Jabir Sandhu, Reginald Xie We identify a few Bank of Canada press releases that had the largest immediate impact on the exchange rate market. We find that volatility increases after these releases, but the effect is short-lived and mostly dissipates after the first hour, on average. Beyond the first hour, the size of the effect is similar to what we observe for other economic releases, such as those for inflation or economic growth data. Content Type(s): Staff research, Staff analytical notes Topic(s): Exchange rates, Financial markets, Monetary policy JEL Code(s): E, E4, E44, F, F3, F31, G, G1, G10, G12, G14, G15
The Trade War in Numbers Staff Working Paper 2018-57 Karyne B. Charbonneau, Anthony Landry We build upon new developments in the international trade literature to isolate and quantify the long-run economic impacts of tariff changes on the United States and the global economy. Content Type(s): Staff research, Staff working papers Topic(s): Recent economic and financial developments, Trade integration JEL Code(s): F, F1, F11, F13, F14, F15, F5, F50, F6, F62, F68
The Propagation of Regional Shocks in Housing Markets: Evidence from Oil Price Shocks in Canada Staff Working Paper 2018-56 Lutz Kilian, Xiaoqing Zhou How do global oil price shocks spread through Canada’s economy? With Canada’s regionally diverse economy in mind, we explore the implications of oil price shocks for Canadian housing markets and regional economies. We show that the belief that oil price shocks only matter in oil-rich regions is false. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Housing, International topics, Labour markets, Regional economic developments JEL Code(s): F, F4, F43, Q, Q3, Q33, Q4, Q43, R, R1, R12, R3, R31