E - Macroeconomics and Monetary Economics

• The Bank of Canada's New Quarterly Projection Model, Part 3. The Dynamic Model: QPM

  Technical Report No. 75 Donald Coletti, Benjamin Hunt, David Rose, Robert Tetlow

  The Bank of Canada's new Quarterly Projection Model, QPM, combines the short-term dynamic properties necessary to support regular economic projections with the consistent behavioural structure necessary for policy analysis.

  Content Type(s): Staff research, Technical reports Topic(s): Economic models JEL Code(s): C, C5, C53, E, E1, E17

• A Distant-Early-Warning Model of Inflation Based on M1 Disequilibria

  Staff Working Paper 1996-5 Joseph Atta-Mensah, Walter Engert, Scott Hendry, Jamie Armour

  A vector error-correction model (VECM) that forecasts inflation between the current quarter and eight quarters ahead is found to provide significant leading information about inflation. The model focusses on the effects of deviations of M1 from its long-run demand but also includes, among other things, the influence of the exchange rate, a simple measure of the output gap and past prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Monetary aggregates, Monetary policy transmission JEL Code(s): E, E3, E37, E5, E52

• Overnight Rate Innovations as a Measure of Monetary Policy Shocks in Vector Autoregressions

  Staff Working Paper 1996-4 Walter Engert, Ben Fung, Jamie Armour

  The authors examine the Bank of Canada's overnight rate as a measure of monetary policy in vector autoregression (VAR) models. Since the time series of the Bank's current measure of the overnight rate begins only in 1971, the authors splice it to day loan rate observations to obtain a sufficiently long period of data.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Monetary and financial indicators JEL Code(s): E, E5, E52

• Decomposing U.S. Nominal Interest Rates into Expected Inflation and Ex Ante Real Interest Rates Using Structural VAR Methodology

  Staff Working Paper 1996-2 Pierre St-Amant

  In this paper, the author uses structural vector autoregression methodology to decompose U.S. nominal interest rates into an expected inflation component and an ex ante real interest rate component. He identifies inflation expectations and ex ante real interest rate shocks by assuming that nominal interest rates and inflation expectations move one-for-one in the long-run—they are cointegrated (1,1)—and that the real interest rate is stationary.

  Content Type(s): Staff research, Staff working papers Topic(s): Interest rates, International topics JEL Code(s): E, E3, E31, E4, E43

• The Electronic Purse: An Overview of Recent Developments and Policy Issues

  Technical Report No. 74 Gerald Stuber

  Futurists have been speculating about the prospects for a cashless society for many years, and such predictions became more frequent following the introduction of "smart" cards - cards containing a computer chip - in the mid-1970s.

  Content Type(s): Staff research, Technical reports Topic(s): Digital currencies and fintech, Financial institutions, Payment clearing and settlement systems, Recent economic and financial developments JEL Code(s): E, E4, E41, G, G2, G20

• The Bank of Canada's New Quarterly Projection Model, Part 1. The Steady-State Model: SSQPM

  Technical Report No. 72 Richard Black, Douglas Laxton, David Rose, Robert Tetlow

  This report is the first documenting the Bank of Canada's new model of the Canadian economy, the Quarterly Projection Model (QPM). QPM is used at the Bank of Canada for both economic projections and policy analysis. Here the authors focus on the model's long-run properties, describing SSQPM, a model of the steady state of QPM […]

  Content Type(s): Staff research, Technical reports Topic(s): Economic models JEL Code(s): C, C5, C51, E, E1, E13

• Wealth, Disposable Income and Consumption: Some Evidence for Canada

  Technical Report No. 71 Tiff Macklem

  The author develops a measure of aggregate private sector wealth in Canada and examines its ability to explain aggregate consumption of non-durables and services. This wealth measure includes financial, physical and human wealth. The author measures human wealth as the expected present value of aggregate labour income, net of government expenditures, based on a discrete […]

  Content Type(s): Staff research, Technical reports Topic(s): Domestic demand and components JEL Code(s): D, D9, D91, E, E2, E21

• From Monetary Policy Instruments to Administered Interest Rates: The Transmission Mechanism in Canada

  Technical Report No. 69 Kevin Clinton, Donna Howard

  The authors investigate interest-rate aspects of the transmission mechanism of monetary policy instruments in Canada, focussing on the stability of the relationships between some key interest rates and the instruments of monetary policy. To determine what shifts may have occurred in recent years, they describe movements in rate differentials, apply cointegration tests and estimate error-correction […]

  Content Type(s): Staff research, Technical reports Topic(s): Monetary policy transmission JEL Code(s): E, E5, E52

• Measurement Biases in the Canadian CPI

  Technical Report No. 64 Allan Crawford

  The consumer price index (CPI) may be an imperfect measure of changes in the cost of living owing to measurement biases known as commodity substitution bias, new goods bias, quality bias and outlet substitution bias. When the sum of these individual biases is positive, the rate of change in the CPI overstates the increase in […]

  Content Type(s): Staff research, Technical reports Topic(s): Inflation and prices JEL Code(s): E, E3, E31

• Monetary Policy, Uncertainty and the Presumption of Linearity

  Technical Report No. 63 Douglas Laxton, David Rose, Robert Tetlow

  This report shows that extreme conditions and volatility in markets are much more likely to result from systematic policy errors in gauging and responding to inflationary pressures in an economy than from unfortunate random shocks. We describe a simple model that incorporates the key features of the policy control process. We use two versions of […]

  Content Type(s): Staff research, Technical reports Topic(s): Economic models, Inflation and prices, Monetary policy and uncertainty JEL Code(s): E, E5, E52