E - Macroeconomics and Monetary Economics
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Quantitative Easing in a Small Open Economy: An International Portfolio Balancing Approach
This paper studies the effects of quantitative easing (QE) in a small open economy dynamic stochastic general-equilibrium model with international portfolio balancing. Portfolios are classified as imperfectly substitutable short-term and long-term subportfolios, each including domestic and foreign bonds. -
Comparing Forward Guidance and Neo-Fisherianism as Strategies for Escaping Liquidity Traps
What path should policy-makers select for the nominal rate when faced with a liquidity trap during which the effective lower bound binds? -
Capital Flows to Developing Countries: Is There an Allocation Puzzle?
Foreign direct investment inflows are positively related to growth across developing countries—but so are savings in excess of investment. I develop an explanation for this well-established puzzle by focusing on the limited availability of consumer credit in developing countries together with general equilibrium effects. -
Supervising Financial Regulators
How much discretion should local financial regulators in a banking union have in accommodating local credit demand? I analyze this question in an economy where local regulators privately observe expected output from high lending. They do not fully internalize default costs from high lending since deposit insurance cannot be priced fairly. -
Central Bank Digital Currencies: A Framework for Assessing Why and How
Digital currencies have attracted strong interest in recent years and have the potential to become widely adopted for use in making payments. Public authorities and central banks around the world are closely monitoring developments in digital currencies and studying their implications for the economy, the financial system and central banks. -
Firm-Specific Shocks and Aggregate Fluctuations
In order to understand what drives aggregate fluctuations, many macroeconomic models point to aggregate shocks and discount the contribution of firm-specific shocks. Recent research from other developed countries, however, has found that aggregate fluctuations are in part driven by idiosyncratic shocks to large firms. -
November 17, 2016
Structural Reforms and Economic Growth in Emerging-Market Economies
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. -
November 17, 2016
Recent Changes to the Bank of Canada’s Emergency Lending Assistance Policy
Emergency Lending Assistance (ELA) is a discretionary last-resort collateralized loan or ad-vance by the Bank of Canada to eligible financial institutions (FIs) and financial market infrastructures (FMIs) facing serious liquidity problems. In December 2015, the Bank revised its ELA policy to (i) replace the requirement for an FI’s solvency with the requirement for a credible recovery and resolution framework; (ii) include mortgages as eligible collateral; and (iii) clarify both the eligibility requirements for FMIs and provincially regulated deposit-taking FIs. -
November 17, 2016
Market Operations and Liquidity Provision at the Bank of Canada
The Bank of Canada’s framework for market operations and liquidity provision describes how and when central bank liquidity might be offered with regards to the implementation of monetary policy and for supporting the stability of the Canadian financial system. Market participants can therefore plan their transactions knowing that the Bank stands ready to help manage system liquidity to support its objectives for monetary policy and financial stability.