E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
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The Efficiency of Private E-Money-Like Systems: The U.S. Experience with National Bank Notes
Beginning in 1864, in the United States notes of national banks were the predominant medium of exchange. Each national bank issued its own notes. E-money shares many of the characteristics of these bank notes. -
International Spillovers of Large-Scale Asset Purchases
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. -
Measuring Potential Output at the Bank of Canada: The Extended Multivariate Filter and the Integrated Framework
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. -
Addressing Household Indebtedness: Monetary, Fiscal or Macroprudential Policy?
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. -
The Impact of U.S. Monetary Policy Normalization on Capital Flows to Emerging-Market Economies
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). -
Targeting Inflation from Below - How Do Inflation Expectations Behave?
Inflation targeting (IT) had originally been introduced as a device to bring inflation down and stabilize it at low levels. Given the current environment of persistently weak inflation in many advanced economies, IT central banks must now bring inflation up to target. -
The Effect of the Federal Reserve’s Tapering Announcements on Emerging Markets
The Federal Reserve’s quantitative easing (QE) program has been accompanied by a flow of funds into emerging-market economies (EMEs) in search of higher returns. -
November 13, 2014
Recent Developments in Experimental Macroeconomics
This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted by Bank of Canada economists has shed light on a number of issues important to monetary policy, such as the relative efficacy between price-level and inflation targeting, and the nature of inflation expectations formation. -
November 13, 2014
Should Forward Guidance Be Backward-Looking?
When constrained by the zero lower bound, some central banks have communicated a threshold that must be met before short-term interest rates would be permitted to rise. Simulation results for Canada show that forward guidance that is conditional on achieving a price-level threshold can theoretically raise demand and inflation expectations by significantly more than unemployment thresholds. This superior performance is attributable to the fact that the price-level threshold depends on past inflation outcomes. In practice, however, history-dependent thresholds such as this might be more challenging for central banks to communicate.