Staff research

• 2020 US Neutral Rate Assessment

  Staff Discussion Paper 2020-12 James Bootsma, Thomas J. Carter, Xin Scott Chen, Christopher Hajzler, Argyn Toktamyssov

  This paper presents Bank of Canada staff’s current assessment of the US neutral rate, along with a newly developed set of models on which that assessment is based. The overall assessment is that the US neutral rate currently lies in a range of 1.75 to 2.75 percent.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41

• The Determinants of Consumers’ Inflation Expectations: Evidence from the US and Canada

  Staff Working Paper 2020-52 Charles Bellemare, Rolande Kpekou Tossou, Kevin Moran

  We compare the determinants of consumer inflation expectations in the US and Canada by analyzing two current surveys. We find that Canadian consumers rely more on professional forecasts and the history of actual inflation when forming their expectations, while US consumers rely more on their own lagged expectations.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Econometric and statistical methods, Inflation and prices, Inflation targets JEL Code(s): C, C3, C33, D, D8, D83, D84, E, E3, E31
• November 30, 2020

  Research Update - November 2020

  This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

  Content Type(s): Staff research, Research newsletters

• The Heterogeneous Effects of COVID-19 on Canadian Household Consumption, Debt and Savings

  Staff Working Paper 2020-51 James (Jim) C. MacGee, Thomas Michael Pugh, Kurt See

  The impact of COVID-19 on Canadian households’ debt and unplanned savings varies by household income. Low-income and high-income households accrued unplanned savings, while middle-income households tended to accumulate more debt.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Coronavirus disease (COVID-19), Financial stability JEL Code(s): E, E2, E21, E24, G, G5, G51

• A Macroeconomic Model of an Epidemic with Silent Transmission and Endogenous Self-isolation

  Staff Working Paper 2020-50 Antonio Diez de los Rios

  We study the interaction between epidemics and economic decisions in a model that has silent transmission of the virus. We find that rational behaviour strongly diminishes the severity of the epidemic but worsens the economic recession. We also find that the detection and isolation of not only symptomatic individuals but also those who are infected and asymptomatic or mildly symptomatic can reduce the severity of the recession caused by the pandemic.

  Content Type(s): Staff research, Staff working papers Topic(s): Coronavirus disease (COVID-19), Economic models JEL Code(s): E, E1, H, H0, I, I1

• Has the Inflation Process Changed? Selective Review of Recent Research on Inflation Dynamics

  Staff Discussion Paper 2020-11 Oleksiy Kryvtsov, James (Jim) C. MacGee

  From 2011 to 2019, inflation in Canada and advanced economies usually registered below inflation targets, spurring the debate on whether the inflation process has changed. This paper highlights emerging questions that will influence the conduct of monetary policy in Canada in the near term.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Inflation and prices, Monetary policy JEL Code(s): E, E3, E31, E5, E52

• Optimal Quantitative Easing in a Monetary Union

  Staff Working Paper 2020-49 Serdar Kabaca, Renske Maas, Kostas Mavromatis, Romanos Priftis

  How should a central bank conduct quantitative easing (QE) in a monetary union when regions differ in their size and portfolio characteristics? Optimal QE policy suggests allocating greater purchases from the region that faces stronger portfolio frictions, and not necessarily according to each region’s size.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Monetary policy JEL Code(s): E, E4, E43, E5, E52, E58

• Concentration in the market of authorized participants of US fixed-income exchange-traded funds

  Staff Analytical Note 2020-27 Rohan Arora, Sébastien Betermier, Guillaume Ouellet Leblanc, Adriano Palumbo, Ryan Shotlander

  We show that a small number of authorized participants (APs) actively create and redeem shares of US-listed fixed-income exchange-traded funds (FI-ETFs). In 2019, three APs performed 82 percent of gross creations and redemptions of FI-ETF shares. In contrast, the group of active APs for equity ETFs was much more diverse.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Financial markets, Financial stability JEL Code(s): G, G1, G2, G20, G23

• Short-Run Dynamics in a Search-Theoretic Model of Monetary Exchange

  Staff Working Paper 2020-48 Jonathan Chiu, Miguel Molico

  We study the short-run effects of monetary policy using a search-theoretic monetary model in which agents are subject to idiosyncratic shocks and aggregate monetary shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Monetary policy, Monetary policy transmission JEL Code(s): E, E4, E40, E5, E50

• Assessing Global Potential Output Growth: October 2020

  Staff Discussion Paper 2020-10 Xin Scott Chen, Ali Jaffery, Guillaume Nolin, Karim Salhab, Peter Shannon, Subrata Sarker

  This paper presents updated estimates of potential output growth for the global economy through 2022. Global potential output growth is expected to decline sharply in the aftermath of the COVID-19 pandemic and recover partially by the end of the projection horizon of the October 2020 Monetary Policy Report.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Potential output, Productivity JEL Code(s): E, E1, E10, E2, E20, O, O4