E - Macroeconomics and Monetary Economics
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A Horse Race of Alternative Monetary Policy Regimes Under Bounded Rationality
We introduce bounded rationality in a canonical New Keynesian model calibrated to match Canadian macroeconomic data since Canada’s adoption of inflation targeting. We use the model to quantitatively assess the macroeconomic impact of alternative monetary policy regimes. -
Monetary Policy and Redistribution in Open Economies
We study how different types of monetary policy shape the distributional effects of external economic shocks on households’ consumption in a small open economy. Our results present a trade-off between maintaining overall stabilization and controlling consumption inequality. -
Payment Coordination and Liquidity Efficiency in the New Canadian Wholesale Payments System
We study the impact of the Bank of Canada’s choice of settlement mechanism in Lynx on participant behaviors, liquidity usage, payment delays and the overall operational efficiency of the new system. -
Heterogeneity and Monetary Policy: A Thematic Review
The theory that rich economic diversity of businesses and households both affects and is shaped by economy-wide fluctuations has strong implications for monetary policy. This review places these insights in a Canadian context. -
On the Wedge Between the PPI and CPI Inflation Indicators
We find that the CPI and PPI inflation indexes co-moved strongly throughout the late 20th century, but their correlation has fallen substantially since the early 2000s. We offer a structural explanation for this divergence based on the growth of global supply chains since 2000. This finding offers a unique perspective for the future design of optimal monetary policy. -
The Financial Origins of Non-fundamental Risk
We explore the idea that the financial sector can be a source of non-fundamental risk to the rest of the economy. We also consider whether policy can be used to reduce this risk—either by increasing the supply of publicly backed safe assets or by reducing the demand for safe assets. -
Transition Scenarios for Analyzing Climate-Related Financial Risk
Climate transition scenarios clarify climate-related risks to our economy and financial system. This paper summarizes key results of Canada-relevant scenarios developed in a pilot project on climate risk by the Bank of Canada and the Office of the Superintendent of Financial Institutions. -
Firm Inattention and the Efficacy of Monetary Policy: A Text-Based Approach
How much attention do firms pay to macroeconomic news? Through a novel text-based measure, two facts emerge. First, attention is polarized. Most firms either never or always pay attention to economic conditions. Second, it is countercyclical. During recessions, more firms pay attention, and firms pay greater attention to macroeconomic news. -
What Drives Bitcoin Fees? Using Segwit to Assess Bitcoin's Long-Run Sustainability
We explore what drives transaction fees in the Bitcoin system and consider whether Bitcoin can remain tamper proof in the long run.