Posts
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Harnessing the benefit of state-contingent forward guidance
A low level of the neutral rate of interest increases the likelihood that a central bank’s policy rate will reach its effective lower bound (ELB) in future economic downturns. In a low neutral rate environment, using an extended monetary policy toolkit including forward guidance helps address the ELB challenge. Using the Bank’s Terms-of-Trade Economic Model, we assess the benefits and limitations of a state-contingent forward guidance implemented within a flexible inflation targeting framework. -
Guarding Against Large Policy Errors under Model Uncertainty
How can policy-makers avoid large policy errors when they are uncertain about the true model of the economy? -
The Determinants of Consumers’ Inflation Expectations: Evidence from the US and Canada
We compare the determinants of consumer inflation expectations in the US and Canada by analyzing two current surveys. We find that Canadian consumers rely more on professional forecasts and the history of actual inflation when forming their expectations, while US consumers rely more on their own lagged expectations. -
What Consistent Responses on Future Inflation by Consumers Can Reveal
We analyze factors that may explain consistent answers to questions about inflation expectations in the Canadian Survey of Consumer Expectations. We also compare the inflation forecasts of consumers with consistent responses with those of professional forecasters. -
Asset Allocation Using Extreme Value Theory
This paper examines asset allocation strategies in an extreme value at risk (VaR) framework in which the risk measure is the p-quantile from the extreme value distribution. The main focus is on the allocation problem faced by an extremely risk-averse institution, such as a central bank. -
What’s Up with Unit Non-Response in the Bank of Canada’s Business Outlook Survey? The Effect of Staff Tenure
Since 1997, the Bank of Canada’s regional offices have been conducting the Business Outlook Survey (BOS), a quarterly survey of business conditions. Survey responses are gathered through face-to-face, confidential consultations with a sample of private sector firms representative of the various sectors, firm sizes and regions across Canada. -
Assessing the Business Outlook Survey Indicator Using Real-Time Data
Every quarter, the Bank of Canada conducts quarterly consultations with businesses across Canada, referred to as the Business Outlook Survey (BOS). A principal-component analysis conducted by Pichette and Rennison (2011) led to the development of the BOS indicator, which summarizes survey results and is used by the Bank as a gauge of overall business sentiment. -
Modelling the Macrofinancial Effects of a House Price Correction in Canada
We use a suite of risk-assessment models to examine the possible impact of a hypothetical house price correction, centred in the Toronto and Vancouver areas. We also assume financial stress significantly amplifies the macroeconomic impact of the house price decline. -
Determinants of Financial Stress and Recovery during the Great Recession
In this paper, we explore the link between stress in the domestic financial sector and the capital flight faced by countries in the 2008-9 global crisis. Both the timing of emergence of internal financial stress in developing economies, and the size of the peak-trough declines in the stock price indices was comparable to that in high income countries, indicating that there was no decoupling, even before Lehman Brothers’ demise.