Communicating Inflation Uncertainty and Household Expectations Staff working paper 2023-63 Olena Kostyshyna, Luba Petersen We examine the value of direct communication to households about inflation and the uncertainty around inflation statistics. All types of information about inflation are effective at immediately managing inflation expectations, with information about outlooks being more effective and relevant than that about recent inflation and Bank targets. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C9, C93, D, D8, D84, E, E5, E59, E7 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Monetary policy tools and implementation
Monetary Policy and Racial Inequality in Housing Markets: A Study of 140 US Metropolitan Areas Staff working paper 2023-62 Qi Li, Xu Zhang We find that minority households see greater declines in housing returns and entries into homeownership than White households after a tightening of monetary policy. Our findings emphasize the unintended consequences of monetary policy on racial inequality in the housing market. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E40, E5, E52, R, R0, R00 Research Theme(s): Financial system, Household and business credit, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Perceived versus Calibrated Income Risks in Heterogeneous-Agent Consumption Models Staff working paper 2023-59 Tao Wang Perceived income risks reported in a survey of consumer expectations are more heterogeneous and, on average, lower than indirectly calibrated risks based on panel data. They prove to be one explanation for why a large fraction of households hold very little liquid savings and why accumulated wealth is widely unequal across households. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D1, D14, E, E2, E21, E7, E71, G, G5, G51 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
The impact of higher interest rates on mortgage payments Staff analytical note 2023-19 Maria teNyenhuis, Adam Su We investigate how the increase in interest rates since early 2022 is affecting mortgage payments. By November 2023, less than half of mortgage holders had faced higher payments. Many borrowers will see a sizable increase in payments at renewal, although income growth could help mitigate the impact. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D1, E, E4, E5, G, G2, G21 Research Theme(s): Financial system, Household and business credit, Monetary policy, Monetary policy framework and transmission
Finding the balance—measuring risks to inflation and to GDP growth Staff analytical note 2023-18 Bruno Feunou, James Kyeong Using our new quantitative tool, we show how the risks to the inflation and growth outlooks have evolved over the course of 2023. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C3, C32, C5, C58, E, E4, E44, G, G1, G17 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting
Making It Real: Bringing Research Models into Central Bank Projections Staff discussion paper 2023-29 Marc-André Gosselin, Sharon Kozicki Macroeconomic projections and risk analyses play an important role in guiding monetary policy decisions. Models are integral to this process. This paper discusses how the Bank of Canada brings research models and lessons learned from those models into the central bank projection environment. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C3, C32, C5, C51, E, E3, E37, E4, E47, E5, E52 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
A Blueprint for the Fourth Generation of Bank of Canada Projection and Policy Analysis Models Staff discussion paper 2023-23 Donald Coletti The fourth generation of Bank of Canada projection and policy analysis models seeks to improve our understanding of inflation dynamics, the supply side of the economy and the underlying risks faced by policy-makers coming from uncertainty about how the economy functions. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C5, C50, C51, C52, C53, C54, C55 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting
Labor Market Shocks and Monetary Policy Staff working paper 2023-52 Serdar Birinci, Fatih Karahan, Yusuf Mercan, Kurt See We develop a heterogeneous-agent New Keynesian model featuring a frictional labor market with on-the-job search to quantitatively study the positive and normative implications of employer-to-employer transitions for inflation. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E1, E12, E2, E24, E5, E52, J, J3, J31, J6, J62, J64 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting
A Behavioral New Keynesian Model of a Small Open Economy Under Limited Foresight Staff working paper 2023-44 Seunghoon Na, Yinxi Xie This paper studies exchange rate dynamics by incorporating bounded rationality, that is, limited foresight, in a small open-economy model. This behavior of limited foresight helps explain several observations and puzzles in the data of exchange rate movements. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E43, E7, E70, F, F3, F31, F4, F41 Research Theme(s): Financial markets and funds management, International markets and currencies, Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Digitalization: Implications for Monetary Policy Staff discussion paper 2023-18 Vivian Chu, Tatjana Dahlhaus, Christopher Hajzler, Pierre-Yves Yanni We explore the implications of digitalization for monetary policy, both in terms of how monetary policy affects the economy and in terms of data analysis and communication with the public. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C4, C8, E, E3, E31, E32, E5, E52 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Monetary policy framework and transmission, Structural challenges, Digitalization and productivity