December 12, 2022
Monetary policy
-
-
Monetary Policy, Credit Constraints and SME Employment
We revisit an old question: how do financial constraints affect the transmission of monetary policy to the real economy? To answer this question, we propose a simple empirical strategy that combines firm-level employment and balance sheet data, identified monetary policy shocks and survey data on financing activities. -
November 10, 2022
Getting back to stable prices and a balanced jobs market
Governor Tiff Macklem discusses the relationship between inflation and employment and how the Bank of Canada is working to cool an overheated economy. -
November 10, 2022
Restoring labour market balance and price stability
Governor Tiff Macklem outlines the link between high inflation and tight labour markets. He explains how the Bank is working to rebalance the labour market and discusses how structural changes may influence the supply of workers in Canada. -
Stagflation and Topsy-Turvy Capital Flows
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. -
Core inflation over the COVID-19 pandemic
We assess the usefulness of various measures of core inflation over the COVID-19 pandemic. We find that Cpi-trim and CPI-median provided the best signal of underlying inflation. The favourable performance of these measures stems from their lack of reliance on historical experience, an especially valuable feature in unprecedented times. -
October 6, 2022
What’s happening to inflation and why it matters
Governor Tiff Macklem discusses how inflation has evolved in recent months and explains what the Bank is watching as it takes action to return inflation to target. -
October 6, 2022
Restoring price stability for all Canadians
Governor Tiff Macklem explains how inflation in Canada reflects more and more what’s happening with domestic demand and what the Bank is watching as it works to bring inflation back to the 2% target. -
Behavioral Learning Equilibria in New Keynesian Models
We introduce behavioral learning equilibria (BLE) into DSGE models with boundedly rational agents using simple but optimal first order autoregressive forecasting rules. The Smets-Wouters DSGE model with BLE is estimated and fits well with inflation survey expectations. As a policy application, we show that learning requires a lower degree of interest rate smoothing. -
How does the Bank of Canada’s balance sheet impact the banking system?
We examine how changes in the Bank of Canada’s balance sheet impact the banking system. Quantitative easing contributed to an increase in the size of the banking system’s balance sheet and an improvement in bank liquidity coverage ratios. Quantitative tightening is expected to partially reverse these impacts. The banking system will have to adjust its liquidity management strategy in response.