Unregulated capital flows are likely excessive during a stagflation episode, owing to a macroeconomic externality operating through the economy’s supply side. Inflows raise domestic wages and cause unwelcome upward pressure on firm costs, yet market forces likely generate such inflows. Optimal capital flow management instead requires net outflows.
The COVID-19 pandemic has caused an atypical recession in which some sectors of the economy boomed and others collapsed. This required a unique fiscal policy reaction to both support firms and stimulate activity in sectors with slack. Was fiscal policy able to get where it was needed? Mostly, yes.
Deputy Governor Paul Beaudry discusses the macroeconomic lessons we’ve learned during the COVID-19 pandemic, and what lies ahead to bring inflation back to target.
Speech summaryPaul BeaudryUniversity of Waterloo Faculty of Arts Distinguished Lecture in EconomicsWaterloo, Ontario
Deputy Governor Paul Beaudry describes how the lessons learned from previous economic crises helped central bankers during the global COVID-19 pandemic. He also talks about how managing inflation expectations can help bring inflation back to target.
This paper examines the cross-border spillovers from major economies’ quantitative easing (QE) policies to their trading partners. We concentrate on spillovers from the US to Canada during the zero lower bound period when QE policies were actively used.
This paper studies the effects of foreign exchange (FX) interventions in a two-region model where governments issue both short- and long-term bonds. We find that the term premium channel dominates the trade balance channel in our calibrated model. As a result, the conventional beggar-thy-neighbor effects of interventions are overturned.
Deputy Governor Toni Gravelle talks about the spike in commodity prices over the past two years, the impact on inflation and how the Bank of Canada is responding.
How do a country’s exports change when its currency depreciates? Does it matter which forces drive the exchange rate deprecation in the first place? We find that this relationship varies greatly depending on what drives exchange rate movements, and we conclude that the direct relationship between the exchange rate and exports is weak for Canada.