Inflation and prices
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Inflation, Output, and Welfare in the Laboratory
We investigate the effect of inflation on output and welfare in the laboratory. Consistent with monetary theory, we find that inflation acts as a tax on monetary exchange and reduces output and welfare. -
February 7, 2023
Monetary policy at work
Bank of Canada Governor Tiff Macklem explains how recent interest rate increases work their way through the Canadian economy to slow demand and bring inflation down. -
February 7, 2023
Higher interest rates are working
Governor Tiff Macklem explains how the Bank of Canada’s increases to the policy interest rate will cool the economy and bring inflation down. -
The 2021–22 Surge in Inflation
The rise in inflation in 2021–22 sparked a growing literature and debate over the causes of the surge as well as the near- and medium-term path for inflation. This review offers three key messages. -
Gazing at r-star: A Hysteresis Perspective
Many explanations for the decline in real interest rates over the last 30 years point to the role that population aging or rising income inequality plays in increasing the long-run aggregate demand for assets. Notwithstanding the importance of such factors, the starting point of this paper is to show that the major change driving household asset demand over this period is instead an increased desire—for a given age and income level—to hold assets. -
Are Temporary Oil Supply Shocks Real?
Hurricanes disrupt oil production in the Gulf of Mexico because producers shut in oil platforms to safeguard lives and prevent damage. We examine the effects of these temporary oil supply shocks on real economic activity in the United States. -
CANVAS: A Canadian Behavioral Agent-Based Model
The Bank of Canada’s current suite of models faces challenges in addressing network effects that integrate household and firm-level heterogeneity and their behaviours. We develop CANVAS, a Canadian behavioural agent-based model to contribute to the Bank’s next-generation modelling effort. CANVAS improves forecasting performance and expands capacity for model-based scenario analysis. -
Understanding Post-COVID Inflation Dynamics
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. Our model can generate more sizable inflation surges due to cost-push and demand shocks than a standard linearized model when inflation is high. -
December 12, 2022
Putting the resolute in resolutions: Looking ahead to lower inflation
Bank of Canada Governor Tiff Macklem discusses the important lessons from 2022 and explains what the Bank is doing to restore price stability for Canadians.