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The purpose of this study is to test the hypothesis that inflation uncertainty increases at higher levels of inflation. Our analysis is based on the generalized autoregressive conditional heteroscedasticity (GARCH) class of models, which allow the conditional variance of the error term to be time-varying. Since this variance is a proxy for inflation uncertainty, a positive relationship between the conditional variance and inflation would be interpreted as evidence that inflation uncertainty increases with the level of inflation.

This paper studies how financial shocks shape the distribution of output growth by introducing a quantile-augmented vector autoregression (QAVAR), which integrates quantile regressions into a structural VAR framework. The QAVAR preserves standard shock identification while delivering flexible, nonparametric forecasts of conditional moments and tail risk measures for gross domestic product.

This paper documents the structure and properties of the Canadian Policy Analysis Model (CPAM). CPAM is designed to provide a reasonably complete representation of the Canadian macro economy.

This paper compares price-level-path targeting (PT) with inflation targeting (IT) in a sticky-price, dynamic, general equilibrium model augmented with imperfections in both the debt and equity markets.

We incorporate a participation decision in a standard New Keynesian model with matching frictions and show that treating the labor force as constant leads to incorrect evaluation of alternative policies.

A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default.

This paper examines the business cycle linkages that propagate industry-specific business cycle shocks throughout the economy in a way that (sometimes) generates aggregated cycles. The transmission of sectoral business cycles is modelled through a multivariate Markov-switching model, which is estimated by Gibbs sampling.

We provide empirical evidence on the impact of oil supply shocks on global aggregates. To do this, we first extract structural oil supply shocks from a standard oil-price determination model found in the literature.

Over the past 25 years, world long-term interest rates have declined to levels not seen since the 1960s. This decline has been accompanied by falling world investment and savings rates. The authors explore global saving and investment outcomes that have led to the fall in the world real interest rate. The results show that the key factors explaining movements in savings and investment are variables that evolve relatively slowly over time, such as labour force growth and the age structure of the world economy. The conclusions suggest that, over the coming years, it is unlikely that these slowly changing variables will be a source of significant changes in world real interest rates.

Why does household financial health matter to the Bank of Canada? It matters because how Canadians spend and how much they spend affect both the conduct of monetary policy and the stability of the financial system.