January 30, 2020
Interest rates
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January 30, 2020
Monetary Policy and Financial Vulnerabilities
Deputy Governor Paul Beaudry discusses how financial vulnerabilities present a challenge for monetary policy. -
Managing GDP Tail Risk
Models for macroeconomic forecasts do not usually take into account the risk of a crisis—that is, a sudden large decline in gross domestic product (GDP). However, policy-makers worry about such GDP tail risk because of its large social and economic costs. -
Lending Standards, Productivity and Credit Crunches
We propose a macroeconomic model in which adverse selection in investment drives the amplification of macroeconomic fluctuations, in line with prominent roles played by the credit crunch and collapse of the asset-backed security market in the financial crisis. -
May 30, 2019
Economic Progress Report: Investing in Growth
Senior Deputy Governor Carolyn A. Wilkins talks about the importance of business investment to the Canadian economy and reviews the latest interest rate decision. -
May 30, 2019
Economic progress depends on business investment
Senior Deputy Governor Carolyn A. Wilkins talks about the importance of business investment to the Canadian economy and reviews the latest interest rate decision. -
The Neutral Rate in Canada: 2019 Update
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. -
The Distributional Effects of Conventional Monetary Policy and Quantitative Easing: Evidence from an Estimated DSGE Model
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. -
The Secular Decline of Forecasted Interest Rates
Canadian interest rates show a secular decline since the 1980s. Long-term survey-based forecasts of interest rates also declined, but less so and were more gradual. Our model-based estimates show an endpoint shifting over time in three phases: a decline between 1990 and 1995, a period of stability between 1996 and 2007, and a further decline since 2008. The current endpoint estimate remains clouded with uncertainty; this is an active area of research. -
Markets Look Beyond the Headline
Many reports and analyses interpret the release of new economic data based on the headline surprise—for instance, total inflation, real GDP growth and the unemployment rate. However, we find that headline news alone cannot adequately explain the responses of market prices to new information. Rather, market prices react more strongly, on average, to non-headline news such as the composition of GDP growth, quality of jobs created and revisions to past data. Thus, tracking the impact of non-headline information released on the news day is crucial in analyzing how markets interpret and react to new economic data.