November 16, 2021 Labour market uncertainties and monetary policy Remarks (delivered virtually) Lawrence L. Schembri Canadian Association for Business Economics Toronto, Ontario Deputy Governor Lawrence Schembri talks about changes to the labour market, and how the pandemic affected Canadian workers. He also discusses how the Bank is adapting labour market analysis tools to help guide monetary policy decisions that will support a more inclusive recovery. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Coronavirus disease (COVID-19), Economic models, Inflation targets, Labour markets, Monetary policy and uncertainty, Potential output
November 16, 2021 Measuring changes to the labour market Speech summary Lawrence L. Schembri Canadian Association for Business Economics Toronto, Ontario Deputy Governor Lawrence Schembri discusses how the Canadian labour market has changed during the pandemic. He explains why better tools to measure the health of the job market will help the Bank of Canada set monetary policy that supports the recovery. Content Type(s): Press, Speeches and appearances, Speech summaries Research Topic(s): Coronavirus disease (COVID-19), Economic models, Inflation targets, Labour markets, Monetary policy and uncertainty, Potential output
Optimal Monetary Policy According to HANK Staff Working Paper 2021-55 Sushant Acharya, Edouard Challe, Keshav Dogra We study optimal monetary policy in an analytically tractable Heterogeneous Agent New Keynesian model. In the model, the central bank has an incentive to reduce consumption inequality in addition to keeping economic activity at its efficient level and inflation stable. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Monetary policy JEL Code(s): E, E2, E21, E3, E30, E5, E52, E6, E62, E63
The Bank of Canada’s “Horse Race” of Alternative Monetary Policy Frameworks: Some Interim Results from Model Simulations Staff Discussion Paper 2021-13 José Dorich, Rhys R. Mendes, Yang Zhang Bank of Canada staff are running a “horse race” of alternative monetary policy frameworks in the lead-up to 2021 renewal of the Bank’s monetary policy framework. This paper summarizes some interim results of model simulations from their research. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Central bank research, Economic models, Inflation targets, Monetary policy, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E2, E27, E3, E4, E5, E52, E58
Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions Staff Working Paper 2021-35 Grzegorz Halaj, Sofia Priazhkina Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Economic models, Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): C, C6, C63, C7, C72, G, G2, G21
The Anatomy of Sentiment-Driven Fluctuations Staff Working Paper 2021-33 Sushant Acharya, Jess Benhabib, Zhen Huo We show that changes in sentiment that aren’t related to fundamentals can drive persistent macroeconomic fluctuations even when all economic agents are rational. Changes in sentiment can also affect how fundamental shocks affect macroeconomic outcomes. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E2, E20, E3, E32, F, F4, F44
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
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
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
Potential output and the neutral rate in Canada: 2021 update Staff Analytical Note 2021-6 Dany Brouillette, Guyllaume Faucher, Martin Kuncl, Austin McWhirter, Youngmin Park We expect potential output growth to be higher than in the October 2020 reassessment. By 2024, growth will be slightly above its average growth from 2010 to 2019. We assess that the Canadian nominal neutral rate continues to lie in the range of 1.75 to 2.75 percent. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Economic models, Interest rates, Labour markets, Monetary policy, Potential output, Productivity JEL Code(s): E, E2, E23, E24, E3, E37, E4, E43, E5, E52