E58 - Central Banks and Their Policies

• November 16, 2017

  An Update on the Neutral Rate of Interest

  Bank of Canada Review - Autumn 2017 José Dorich, Abeer Reza, Subrata Sarker

  The neutral rate serves as a benchmark for measuring monetary stimulus and provides a medium- to long-run anchor for the real policy rate. Global neutral rate estimates have been falling over the past few decades. Factors such as population aging, high corporate savings, and low trend productivity growth are likely to continue supporting a low global neutral rate. These global factors as well as domestic factors are exerting downward pres-sure on the Canadian real neutral rate, which is estimated to be between 0.5 to 1.5 per cent. This low neutral rate has important implications for monetary policy and financial stability.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates, International topics, Potential output, Recent economic and financial developments JEL Code(s): E, E4, E43, E5, E52, E58, F, F0, F01, F4, F43, O, O4
• November 16, 2017

  An Initial Assessment of Changes to the Bank of Canada’s Framework for Market Operations

  Bank of Canada Review - Autumn 2017 Kaetlynd McRae, Sean Durr, David Manzo

  The Bank of Canada made changes to several of the tools that make up its framework for operations and liquidity provision. These changes came about after a comprehensive re-view of the framework and are designed to help the Bank better achieve its objectives of reinforcing the target for the overnight rate and supporting the well-functioning of Cana-dian financial markets under normal market conditions.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets, Financial stability, Monetary policy framework, Monetary policy implementation, Monetary policy transmission, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E44, E5, E52, E58, G, G0, G01, G1, G18

• Communicating Uncertainty in Monetary Policy

  Staff Discussion Paper 2017-14 Sharon Kozicki, Jill Vardy

  While central banks cannot provide complete foresight with respect to their future policy actions, it is in the interests of both central banks and market participants that central banks be transparent about their reaction functions and how they may evolve in response to economic developments, shocks, and risks to their outlooks.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Credibility, Monetary policy, Monetary policy and uncertainty, Monetary policy communications JEL Code(s): E, E5, E52, E58, E6, E61, E65

• Monetary Policy Under Uncertainty: Practice Versus Theory

  Staff Discussion Paper 2017-13 Rhys R. Mendes, Stephen Murchison, Carolyn A. Wilkins

  For central banks, conducting policy in an environment of uncertainty is a daily fact of life. This uncertainty can take many forms, ranging from incomplete knowledge of the correct economic model and data to future economic and geopolitical events whose precise magnitudes and effects cannot be known with certainty.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Monetary policy, Monetary policy and uncertainty JEL Code(s): E, E5, E52, E58, E6, E61, E65