Monetary Policy

• Frictional Capital Reallocation I: Ex Ante Heterogeneity

  Staff Working Paper 2019-4 Randall Wright, Sylvia Xiaolin Xiao, Yu Zhu

  This paper studies dynamic general equilibrium models where firms trade capital in frictional markets. Gains from trade arise due to ex ante heterogeneity: some firms are better at investment, so they build capital in the primary market; others acquire it in the secondary market.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Monetary Policy JEL Code(s): E, E2, E22, E4, E44

• A Framework for Analyzing Monetary Policy in an Economy with E-money

  Staff Working Paper 2019-1 Yu Zhu, Scott Hendry

  This paper considers an economy where central-bank-issued fiat money competes with privately issued e-money. We study a policy-setting game between the central bank and the e-money issuer and find (1) the optimal monetary policy of the central bank depends on the policy of the private issuer and may deviate from the Friedman rule; (2) there may exist multiple equilibria; (3) when the economy approaches a cashless state, the central bank’s optimal policy improves the market power of the e-money issuer and can lead to a discrete decrease in welfare and a discrete increase in inflation; and (4) first best cannot be achieved.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Digital Currencies and Fintech, Monetary Policy JEL Code(s): E, E5, E52

• Credibility, Flexibility and Renewal: The Evolution of Inflation Targeting in Canada

  Staff Discussion Paper 2018-18 Thomas J. Carter, Rhys R. Mendes, Lawrence L. Schembri

  In 1991, Canada became the second country to adopt an inflation target as a central pillar of its monetary policy framework. The regime has proven much more successful than initially expected, both in achieving price stability and in stabilizing the real economy against a wide range of shocks.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Credibility, Inflation targets, Monetary Policy, Monetary policy framework JEL Code(s): E, E5, E52, E58, E6, E61
• December 6, 2018

  Year-End Economic Progress Report: Financial Vulnerabilities in Focus

  Remarks Stephen S. Poloz CFA Toronto Toronto, Ontario

  Governor Poloz talks about how household debt levels and housing markets played a role in the latest interest-rate decision.

  Content Type(s): Press, Speeches Topic(s): Financial stability, Housing, Monetary Policy, Recent economic and financial developments

• The Impact of Surprising Monetary Policy Announcements on Exchange Rate Volatility

  Staff Analytical Note 2018-39 Adam Albogatchiev, Jean-Sébastien Fontaine, Jabir Sandhu, Reginald Xie

  We identify a few Bank of Canada press releases that had the largest immediate impact on the exchange rate market. We find that volatility increases after these releases, but the effect is short-lived and mostly dissipates after the first hour, on average. Beyond the first hour, the size of the effect is similar to what we observe for other economic releases, such as those for inflation or economic growth data.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Exchange rates, Financial markets, Monetary Policy JEL Code(s): E, E4, E44, F, F3, F31, G, G1, G10, G12, G14, G15

• Does US or Canadian Macro News Drive Canadian Bond Yields?

  Staff Analytical Note 2018-38 Bruno Feunou, Rodrigo Sekkel, Morvan Nongni Donfack

  We show that a large share of low-frequency (quarterly) movements in Canadian government bond yields can be explained by macroeconomic news, even though high-frequency (daily) changes are driven by other shocks. Furthermore, we show that US macro news—not domestic news— explains most of the quarterly variation in Canadian bond yields.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Financial markets, International topics, Monetary Policy JEL Code(s): C, C2, C22, E, E4, E43
• November 5, 2018

  Making Sense of Markets

  Remarks Stephen S. Poloz Canada–UK Chamber of Commerce London, United Kingdom

  Governor Poloz discusses how the Bank uses financial market information in its monetary policy.

  Content Type(s): Press, Speeches Topic(s): Asset Pricing, Financial markets, Interest rates, Monetary Policy, Recent economic and financial developments

• Evaluating the Bank of Canada Staff Economic Projections Using a New Database of Real-Time Data and Forecasts

  Staff Working Paper 2018-52 Julien Champagne, Guillaume Poulin-Bellisle, Rodrigo Sekkel

  We present a novel database of real-time data and forecasts from the Bank of Canada’s staff economic projections. We then provide a forecast evaluation for GDP growth and CPI inflation since 1982: we compare the staff forecasts with those from commonly used time-series models estimated with real-time data and with forecasts from other professional forecasters and provide standard bias tests.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Economic models, Inflation targets, Monetary Policy JEL Code(s): C, C3, C32, E, E1, E17, E3, E37
• October 31, 2018

  Opening Statement before the Standing Senate Committee on Banking, Trade and Commerce

  Opening Statement Stephen S. Poloz Standing Senate Committee on Banking, Trade and Commerce Ottawa, Ontario

  Content Type(s): Press, Speeches Topic(s): Inflation and prices, Monetary Policy, Recent economic and financial developments, Transmission of monetary policy
• October 30, 2018

  Opening Statement before the House of Commons Standing Committee on Finance

  Opening Statement Stephen S. Poloz House of Commons Standing Committee on Finance Ottawa, Ontario

  Content Type(s): Press, Speeches Topic(s): Inflation and prices, Monetary Policy, Recent economic and financial developments, Transmission of monetary policy