E52 - Monetary Policy

• The International Experience with Negative Policy Rates

  Staff Discussion Paper 2015-13 Harriet Jackson

  A key issue in the renewal of the inflation-control agreement is the question of the appropriate level of the inflation target. Many observers have raised concerns that with the reduction in the neutral rate, and the experience of the recent financial crisis, the effective lower bound (ELB) is more likely to be binding in the future if inflation targets remain at 2 per cent.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Financial markets, International topics, Monetary policy framework JEL Code(s): E, E5, E52, E58, E6, E65

• A Comprehensive Evaluation of Measures of Core Inflation for Canada

  Staff Discussion Paper 2015-12 Mikael Khan, Louis Morel, Patrick Sabourin

  This paper evaluates the usefulness of various measures of core inflation for the conduct of monetary policy. Traditional exclusion-based measures of core inflation are found to perform relatively poorly across a range of evaluation criteria, in part due to their inability to filter unanticipated transitory shocks.

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

• Exchange Rate Pass-Through to Consumer Prices: Theory and Recent Evidence

  Staff Discussion Paper 2015-9 Laurence Savoie-Chabot, Mikael Khan

  In an open economy such as Canada’s, exchange rate movements can have a material impact on consumer prices. This is particularly important in the current context, with the significant depreciation of the Canadian dollar vis-a-vis the U.S. dollar since late 2012.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Exchange rates, Inflation and prices JEL Code(s): E, E3, E31, E5, E52, F, F3, F31

• The Optimal Level of the Inflation Target: A Selective Review of the Literature and Outstanding Issues

  Staff Discussion Paper 2015-8 Oleksiy Kryvtsov, Rhys R. Mendes

  Bank of Canada research done prior to the most recent renewal of the inflation-control agreement in 2011 concluded that the benefits associated with a target below 2 per cent were insufficient to justify the increased risk of being constrained by the zero lower bound (ZLB) on nominal interest rates.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation targets, Inflation: costs and benefits, Monetary policy framework JEL Code(s): E, E5, E52, E58

• On the Nexus of Monetary Policy and Financial Stability: Recent Developments and Research

  Staff Discussion Paper 2015-7 Oleksiy Kryvtsov, Miguel Molico, Ben Tomlin

  Because financial and macroeconomic conditions are tightly interconnected, financial stability considerations are an important element of any monetary policy framework. Yet, the circumstances under which it would be appropriate for the Bank to use monetary policy to lean against financial risks need to be more fully specified (Côté 2014).

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial stability, Monetary policy framework JEL Code(s): E, E0, E4, E44, E5, E52, E58, G, G1, G18

• Effects of Funding Portfolios on the Credit Supply of Canadian Banks

  Staff Working Paper 2015-10 H. Evren Damar, Césaire Meh, Yaz Terajima

  This paper studies how banks simultaneously manage the two sides of their balance sheet and its implications for bank risk taking and real economic activity. First, we analyze how changes in funding affect the supply of bank loans.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies, Monetary policy implementation JEL Code(s): E, E5, E52, G, G2, G21

• International Spillovers of Large-Scale Asset Purchases

  Staff Working Paper 2015-2 Sami Alpanda, Serdar Kabaca

  This paper evaluates the international spillover effects of large-scale asset purchases (LSAPs) using a two-country dynamic stochastic general-equilibrium model with nominal and real rigidities, and portfolio balance effects.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, International topics, Monetary policy transmission JEL Code(s): E, E5, E52, F, F4, F41

• Measuring Potential Output at the Bank of Canada: The Extended Multivariate Filter and the Integrated Framework

  Staff Discussion Paper 2015-1 Lise Pichette, Pierre St-Amant, Ben Tomlin, Karine Anoma

  Estimating potential output and the output gap - the difference between actual output and its potential - is important for the proper conduct of monetary policy. However, the measurement and interpretation of potential output, and hence the output gap, is fraught with uncertainty, since it is unobservable.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Inflation and prices, Labour markets, Productivity JEL Code(s): E, E0, E3, E31, E5, E52

• Addressing Household Indebtedness: Monetary, Fiscal or Macroprudential Policy?

  Staff Working Paper 2014-58 Sami Alpanda, Sarah Zubairy

  In this paper, we build a dynamic stochastic general-equilibrium model with housing and household debt, and compare the effectiveness of monetary policy, housing-related fiscal policy, and macroprudential regulations in reducing household indebtedness.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial system regulation and policies, Housing, Monetary policy transmission JEL Code(s): E, E5, E52, E6, E62, R, R3, R38

• The Impact of U.S. Monetary Policy Normalization on Capital Flows to Emerging-Market Economies

  Staff Working Paper 2014-53 Tatjana Dahlhaus, Garima Vasishtha

  The Federal Reserve’s path for withdrawal of monetary stimulus and eventually increasing interest rates could have substantial repercussions for capital flows to emerging-market economies (EMEs).

  Content Type(s): Staff research, Staff working papers Topic(s): International topics, Monetary policy transmission JEL Code(s): C, C3, C32, E, E5, E52, F, F3, F33, F4, F42