E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
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Has the Inflation Process Changed? Selective Review of Recent Research on Inflation Dynamics
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. -
Optimal Quantitative Easing in a Monetary Union
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. -
Short-Run Dynamics in a Search-Theoretic Model of Monetary Exchange
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. -
Understanding Trend Inflation Through the Lens of the Goods and Services Sectors
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. -
The neutral rate in Canada: 2020 update
The neutral rate of interest is important for central banks because it helps measure the stance of monetary policy. We present updated estimates of the neutral rate in Canada using the most recent data. We expect the COVID-19 pandemic to significantly affect the fundamental drivers of the Canadian neutral rate. -
Forward Guidance and Expectation Formation: A Narrative Approach
How exactly does forward guidance influence interest rate expectations? -
What do high-frequency expenditure network data reveal about spending and inflation during COVID‑19?
The official consumer price index (CPI) inflation measure, based on a fixed basket set before the COVID 19 pandemic, may not fully reflect what consumers are currently experiencing. We partnered with Statistics Canada to construct a more representative index for the pandemic with weights based on real-time transaction and survey data. -
Liquidity Usage and Payment Delay Estimates of the New Canadian High Value Payments System
As part of modernizing its core payments infrastructure, Canada will replace the Large Value Transfer System (LVTS) with a new Real-Time Gross Settlement (RTGS) system called Lynx. An important question for policy-makers is how Lynx should be designed. -
Why Do Central Banks Make Public Announcements of Open Market Operations?
Central banks communicate the results of open market operations. This helps participants in financial markets more accurately estimate the prevailing demand and supply conditions in the market for overnight loans.