E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit

• May 14, 2015

  Inflation Dynamics in the Post-Crisis Period

  Bank of Canada Review - Spring 2015 Christian Friedrich, Marc-André Gosselin

  Inflation rates in advanced economies experienced two consecutive puzzles during the period following the global financial crisis—unexpectedly high inflation from the end of 2009 to 2011 and unexpectedly low inflation from 2012 to the middle of 2014. We investigate these developments in two ways. First, we show that accounting for inflation expectations by households explains a significant share of the inflation puzzles at the international level. Second, we find that, for Canada, elevated competition in the retail sector is also important for understanding inflation dynamics in the post-crisis period.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, International topics, Regional economic developments JEL Code(s): E, E3, E31, E5, F, F4, F41
• May 14, 2015

  The “Bank” at the Bank of Canada

  Bank of Canada Review - Spring 2015 Thérèse Couture, Christian Bélisle

  In this article, we describe the various types of banking services (payments, settlement and safekeeping) that the Bank of Canada provides to different types of clients (the Government of Canada, financial market infrastructures, financial institutions, foreign central banks and the Canada Deposit Insurance Corporation). We also explain the reasons the Bank provides these services and how this role supports its core mandates, in particular financial stability. Finally, we explore the factors driving the growth and evolution in the provision of these banking services.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial services, Foreign reserves management, Payment clearing and settlement systems JEL Code(s): E, E5, E50, G, G2, G20

• Euro Area Government Bonds—Integration and Fragmentation During the Sovereign Debt Crisis

  Staff Working Paper 2015-13 Michael Ehrmann, Marcel Fratzscher

  The paper analyzes the integration of euro area sovereign bond markets during the European sovereign debt crisis. It tests for contagion (i.e., an intensification in the transmission of shocks across countries), fragmentation (a reduction in spillovers) and flight-to-quality patterns, exploiting the heteroskedasticity of intraday changes in bond yields for identification.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates, International financial markets JEL Code(s): E, E5, F, F3, G, G1, G15

• 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

• The Efficiency of Private E-Money-Like Systems: The U.S. Experience with National Bank Notes

  Staff Working Paper 2015-3 Warren E. Weber

  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.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Financial services JEL Code(s): E, E4, E41, E42, E5, E58

• 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

• Targeting Inflation from Below - How Do Inflation Expectations Behave?

  Staff Working Paper 2014-52 Michael Ehrmann

  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.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Inflation targets JEL Code(s): C, C5, C53, E, E3, E31, E5, E52, E58