E3 - Prices, Business Fluctuations, and Cycles

• (Optimal) Monetary Policy with and without Debt

  Staff Working Paper 2021-5 Boris Chafwehé, Rigas Oikonomou, Romanos Priftis, Lukas Vogel

  How should policy be designed at high debt levels, when fiscal authorities have little room to adjust taxes? Assigning the monetary authority a role in achieving debt sustainability makes it less effective in stabilizing inflation and output.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Fiscal policy, Monetary policy, Monetary policy framework JEL Code(s): C, C1, C11, E, E3, E31, E5, E52, E58, E6, E62

• Qualitative Field Research in Monetary Policy Making

  Staff Discussion Paper 2021-1 Chris D'Souza, Jane Voll

  Central banks conduct research involving in-depth interviews with external parties—but little is known about how this information affects monetary policy. We address this gap by analyzing open-ended interviews with senior central bank economic and policy staff who work closely with policy decision-makers.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Monetary policy, Monetary policy and uncertainty JEL Code(s): C, C8, C83, E, E3, E37, E5, E52

• Using Payments Data to Nowcast Macroeconomic Variables During the Onset of COVID-19

  Staff Working Paper 2021-2 James Chapman, Ajit Desai

  We use retail payment data in conjunction with machine learning techniques to predict the effects of COVID-19 on the Canadian economy in near-real time. Our model yields a significant increase in macroeconomic prediction accuracy over a linear benchmark model.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Payment clearing and settlement systems JEL Code(s): C, C5, C53, C55, E, E3, E37, E4, E42, E5, E52

• A Reference Guide for the Business Outlook Survey

  Staff Discussion Paper 2020-15 David Amirault, Naveen Rai, Laurent Martin

  The Business Outlook Survey (BOS) has become an important part of monetary policy deliberations at the Bank of Canada and is also well known in Canadian policy and financial circles. This paper compiles more than 20 years of experience conducting the BOS and serves as a comprehensive reference manual.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Firm dynamics, Regional economic developments JEL Code(s): C, C8, C83, D, D2, D22, E, E3, E32

• Can the Business Outlook Survey Help Improve Estimates of the Canadian Output Gap?

  Staff Discussion Paper 2020-14 Calista Cheung, Luke Frymire, Lise Pichette

  We investigate whether questions in the Bank of Canada’s Business Outlook Survey can provide useful signals for the output gap.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Central bank research, Economic models, Monetary policy and uncertainty, Potential output JEL Code(s): E, E3

• 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

• 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

• How Should Unemployment Insurance Vary over the Business Cycle?

  Staff Working Paper 2020-47 Serdar Birinci, Kurt See

  Should unemployment benefits be more generous during economic downturns? The optimal amount and duration of benefit payments ultimately depend on the demographic and wealth characteristics of benefit recipients.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Fiscal policy, Labour markets JEL Code(s): E, E2, E24, E3, E32, J, J6, J64, J65

• Understanding Trend Inflation Through the Lens of the Goods and Services Sectors

  Staff Working Paper 2020-45 Yunjong Eo, Luis Uzeda, Benjamin Wong

  The goods and services sectors have experienced considerably different dynamics over the past three decades. Our goal in this paper is to understand how such contrasting behaviors at the sectoral level affect the aggregate level of trend inflation dynamics.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Inflation and prices, Monetary policy transmission JEL Code(s): C, C1, C11, C3, C32, E, E3, E31, E5, E52

• Potential output in Canada: 2020 reassessment

  Staff Analytical Note 2020-25 Dany Brouillette, Julien Champagne, Julien McDonald-Guimond

  After COVID-19, we expect potential output growth to stabilize around 1.2 percent. This is lower than the 2010–18 average growth of 1.8 percent. Relative to the April 2019 reassessment, the growth profile is revised down. Given the unknown course of the pandemic, uncertainty around these estimates is higher than in previous years.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Labour markets, Potential output, Productivity JEL Code(s): E, E0, E00, E2, E23, E24, E3, E37, E6