We propose a new strength measure of the global financial cycle by estimating a regime-switching factor model on cross-border equity flows for 61 countries. We then assess how the strength of the global financial cycle affects monetary policy independence, which is defined as the response of central banks' policy interest rates to exogenous changes in inflation.
This paper identifies aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 3% of the variation in U.S. public firms’ aggregate investment.
We present the structure and features of the International Model for Projecting Activity (IMPACT), a global semi-structural model used to conduct projections and policy analysis at the Bank of Canada. Major blocks of the model are developed based on the rational error correction framework of Kozicki and Tinsley (1999), which allows the model to strike a balance between theoretical structure and empirical performance.
Real growth in gross domestic product tends to be meaningfully higher when a large share of industries and demand components are growing—that is, when growth is broad across many fronts.
Senior Deputy Governor Carolyn A. Wilkins explains that Canada is well-positioned to secure prosperity and avoid a long period of slow growth if we take the right steps.
Senior Deputy Governor Carolyn A. Wilkins talks about how to navigate slow growth and discusses the types of policies that would help secure long-term prosperity.
This research develops a model in which the economy is directly influenced by how pessimistic or optimistic economic agents are about the future. The agents may hold different views and update them as new economic data become available.
This paper studies the implications of model uncertainty for wealth distribution in a tractable general equilibrium model with a borrowing constraint and robustness à la Hansen and Sargent (2008). Households confront model uncertainty about the process driving the return of the risky asset, and they choose robust policies.