E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination

• May 11, 2017

  Unconventional Monetary Policy: The Perspective of a Small Open Economy

  Bank of Canada Review - Spring 2017 Jean-Sébastien Fontaine, Lena Suchanek, Jing Yang

  How do unconventional monetary policies like quantitative easing and negative interest rates affect domestic financial conditions and the broader economy in small open econo-mies, such as Canada? These policies are effective in depreciating the exchange rate in small open economies, while lower interest rates are also passed through to the economy, albeit only partially. When conventional monetary policy is close to its limits, fiscal policy may be a more important complement to monetary policy in a small economy, particularly if global demand for safe assets compresses long-term interest rates.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates, Monetary policy framework, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E5, E52, E58, E6, E61, E65
• November 17, 2016

  Structural Reforms and Economic Growth in Emerging-Market Economies

  Bank of Canada Review - Autumn 2016 Jeannine Bailliu, Christopher Hajzler

  Growth has slowed in many emerging-market economies (EMEs) since the 2007–09 global financial crisis, reflecting both cyclical and structural factors. In this context, it will be in-creasingly important for EMEs to raise potential growth by maintaining steady progress on structural reforms. How do structural reforms generally support growth? What are the re-form priorities for EMEs over recent history and today? Finally, what will be the impact of planned structural reforms on potential output growth among the world’s larger EMEs? These are some of the questions considered by the authors.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Development economics, International topics, Potential output JEL Code(s): E, E0, E02, E6, E61, E65, O, O1, O11, O4, O41
• November 17, 2016

  Reinventing the Role of Central Banks in Financial Stability

  Bank of Canada Review - Autumn 2016 Domenico Lombardi, Lawrence L. Schembri

  Central banks contribute importantly to the promotion of financial stability given their sys-tem-wide macro-financial perspective and existing roles as lender of last resort and overseer of systemic payment systems. Since the global financial crisis, the financial system role of central banks has expanded to place more emphasis on the prevention of financial stress and crises. Central banks work with other responsible authorities to enhance financial system resilience and to assess and mitigate financial vulnerabilities and systemic risk.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial stability, Financial system regulation and policies, Lender of last resort, Monetary policy framework JEL Code(s): E, E4, E42, E5, E58, E6, E61, G, G2, G28
• May 16, 2016

  A New Era of Central Banking: Unconventional Monetary Policies

  Bank of Canada Review - Spring 2016 Eric Santor, Lena Suchanek

  Central banks can implement unconventional monetary policy measures to provide additional easing when policy interest rates come close to their lower limit. To date, the international experience with tools such as quantitative easing and negative interest rates has been largely positive. Central banks may also use several such measures simultaneously, with often mutually reinforcing effects. Yet, unconventional tools are also subject to potential limits, and the costs associated with these measures could rise with extensive and prolonged use.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates, International topics, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E5, E52, E58, E6, E61, E65

• Quantitative Easing as a Policy Tool Under the Effective Lower Bound

  Staff Discussion Paper 2015-14 Abeer Reza, Eric Santor, Lena Suchanek

  This paper summarizes the international evidence on the performance of quantitative easing (QE) as a monetary policy tool when conventional policy rates are constrained by the effective lower bound (ELB). A large body of evidence suggests that expanding the central bank’s balance sheet through large-scale asset purchases can provide effective stimulus under the ELB.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, International topics, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E5, E52, E58, E6, E61, E65, N, N1, N10

• Integrating Uncertainty and Monetary Policy-Making: A Practitioner’s Perspective

  Staff Discussion Paper 2014-6 Stephen S. Poloz

  This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Financial stability, Monetary policy and uncertainty, Monetary policy communications, Monetary policy framework JEL Code(s): C, C5, C50, E, E3, E37, E5, E6, E61
• February 21, 2013

  The G-20 Framework for Strong, Sustainable and Balanced Growth: Macroeconomic Coordination Since the Crisis

  Bank of Canada Review - Winter 2012-2013 Robert Lavigne, Subrata Sarker

  Since 2009, the G-20 Framework for Strong, Sustainable and Balanced Growth has provided a mechanism for international macroeconomic policy coordination. The Framework has had some successes, including agreement on objectives for fiscal consolidation. However, post-crisis global growth has been neither strong nor balanced. Progress has also been slow in developing credible fiscal consolidation plans in some advanced countries and in increasing exchange rate flexibility in certain emerging economies. A stronger peer review process and enhanced analysis of international spillovers would increase the Framework’s influence on member policies.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rate regimes, Fiscal policy, International topics, Recent economic and financial developments JEL Code(s): E, E6, E61, F, F5, F53, F55

• The Power of Many: Assessing the Economic Impact of the Global Fiscal Stimulus

  Staff Discussion Paper 2010-1 Carlos De Resende, René Lalonde, Stephen Snudden

  The Bank of Canada Global Economy Model (BoC-GEM) is used to examine the effect of various types of discretionary fiscal policies on different regions of the globe. The BoC-GEM is a microfounded dynamic stochastic general-equilibrium global model with six regions, multiple sectors, and international linkages.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Fiscal policy, International topics, Recent economic and financial developments JEL Code(s): E, E5, E52, E58, E6, E61, E63, F, F4, F42

• Should Central Banks Adjust Their Target Horizons in Response to House-Price Bubbles?

  Staff Discussion Paper 2007-4 Meenakshi Basant Roi, Rhys R. Mendes

  The authors investigate the implications of house-price bubbles for the optimal inflation-target horizon using a dynamic general-equilibrium model with credit frictions, house-price bubbles, and small open-economy features. They find that, given the distribution of shocks and inflation persistence over the past 25 years, the optimal target horizon for Canada tends to be at the lower […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Credit and credit aggregates, Economic models, Inflation targets, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E4, E42, E44, E5, E52, E58, E6, E61

• Time-Consistent Control in Non-Linear Models

  Staff Working Paper 2007-3 Steve Ambler, Florian Pelgrin

  We show how to use optimal control theory to derive optimal time-consistent Markov-perfect government policies in nonlinear dynamic general equilibrium models, extending the result of Cohen and Michel (1988) for models with quadratic objective functions and linear dynamics. We replace private agents' costates by flexible functions of current states in the government's maximization problem.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Monetary policy framework JEL Code(s): C, C6, C63, E, E6, E61, E62