Global Factors and Inflation in Canada Staff Analytical Note 2017-17 Dany Brouillette, Laurence Savoie-Chabot This note investigates whether the recent weakness in inflation in Canada can be related to global factors not included in the current staff analytical framework (domestic slack, movements in commodity prices and in the exchange rate). A global common factor for inflation among selected advanced economies appears to contain marginal information for Canadian inflation beyond what is found in movements in commodity prices and the exchange rate. Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation and prices, Recent economic and financial developments JEL Code(s): E, E3, E31
Low Inflation in Advanced Economies: Facts and Drivers Staff Analytical Note 2017-16 Sanjana Bhatnagar, Anne-Katherine Cormier, Patrisha de Leon-Manlagnit, Elise Martin, Vikram Rai, Renaud St-Cyr, Subrata Sarker, Kristina Hess Since the global financial crisis, core inflation has been persistently below target in most advanced economies. Recently, it has weakened further in several advanced economies despite gradually diminishing slack. This note reviews recent developments in core inflation across advanced economies and identifies distinctive patterns across regions. Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation and prices, International topics JEL Code(s): E, E0, E3, E31, F, F0
Complementing the Credit Risk Assessment of Financial Counterparties with Market-Based Indicators Staff Analytical Note 2017-15 Guillaume Ouellet Leblanc, Maarten van Oordt The Bank’s internal credit risk assessment abilities are regularly enhanced. In this note, we present a recent innovation that extends the set of market-based indicators used in the credit risk assessment of financial counterparties. Content Type(s): Staff research, Staff analytical notes Topic(s): Credit risk management, Financial institutions JEL Code(s): G, G1, G10, G2, G24
Can the Canadian International Investment Position Stabilize a Slowing Economy? Staff Analytical Note 2017-14 Maxime Leboeuf, Chen Fan In this note, we find that valuation effects can act as an important stabilizer, strengthening Canada’s net external wealth when its economic outlook worsens relative to that of other countries. Content Type(s): Staff research, Staff analytical notes Topic(s): Balance of payments and components, International financial markets JEL Code(s): F, F2, F21, F3, F32
Measuring Limits of Arbitrage in Fixed-Income Markets Staff Working Paper 2017-44 Jean-Sébastien Fontaine, Guillaume Nolin We use relative value to measure limits to arbitrage in fixed-income markets. Relative value captures apparent deviations from no-arbitrage relationships. It is simple, intuitive and can be computed model-free for any bond. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, International financial markets JEL Code(s): G, G1, G12
The Mode is the Message: Using Predata as Exclusion Restrictions to Evaluate Survey Design Staff Working Paper 2017-43 Heng Chen, Geoffrey R. Dunbar, Rallye Shen Changes in survey mode (e.g., online, offline) may influence the values of survey responses, and may be particularly problematic when comparing repeated cross-sectional surveys. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C8
Redistributive Effects of a Change in the Inflation Target Staff Analytical Note 2017-13 Robert Amano, Thomas J. Carter, Yaz Terajima In light of the financial crisis and its aftermath, several economists have argued that inflation-targeting central banks should reconsider the level of their inflation targets. While the appropriate level for the inflation target remains an open question, it’s important to note that any transition to a new target would entail certain costs. Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation targets, Monetary policy framework JEL Code(s): E, E5, E52, E58
Policy Rules for Capital Controls Staff Working Paper 2017-42 Gurnain Pasricha This paper attempts to borrow the tradition of estimating policy reaction functions in monetary policy literature and apply it to capital controls policy literature. Using a novel weekly dataset on capital controls policy actions in 21 emerging economies over the period 1 January 2001 to 31 December 2015, I examine the mercantilist and macroprudential motivations for capital control policies. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes, Financial stability, Financial system regulation and policies, International topics JEL Code(s): F, F3, F4, F5, G, G0, G1
September 30, 2017 Research Update - September 2017 This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website. Content Type(s): Staff research, Research newsletters
Global Trade Flows: Revisiting the Exchange Rate Elasticities Staff Working Paper 2017-41 Matthieu Bussière, Guillaume Gaulier, Walter Steingress This paper contributes to the debate on the magnitude of exchange rate elasticities by providing a set of price and quantity elasticities for 51 advanced and emerging-market economies. Specifically, for each of these countries we report the elasticity of trade prices and trade quantities on both the export and on the import sides, as well as the reaction of the trade balance. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Inflation and prices, International topics JEL Code(s): C, C5, C51, F, F1, F14, F3, F31, F33, F4, F41