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We construct a 23-country panel data set to consider the effect of central bank projections and forward guidance on private-sector forecast disagreement. We find that central bank projections and forward guidance matter mainly for private-sector forecast disagreement surrounding upcoming policy rate decisions and matter less for private-sector macroeconomic forecasts.

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Brass Cash Register, 1910

The register is part of the National Currency Collection, Bank of Canada.

Photographed by Gord Carter, Ottawa.

The ongoing process of price discovery in foreign exchange markets provides valuable information to certain market participants. Recent empirical findings suggest that aggregate measures of order flow convey information about the fundamental value of the exchange rate. Using a market microstructure approach, D'Souza reports on a two-year study of completed transactions within the Canadian and Australian exchange rate markets to examine the relationship between exchange rate returns and trades initiated in different locations. Based on the information content of the trades, he finds that geographic location and hours of operation are two of the factors driving informed interdealer trading.

In 2006, the Bank initiated a research program exploring two alternatives to the current inflation-targeting framework: (i) lowering the inflation target and (ii) shifting to a price-level target. This article discusses progress to date, places the Bank's findings in the context of a broader literature, and identifies avenues for future research.

Latency delays—known as “speed bumps”—are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote “quote fading” by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders.

Inflation expectations are a key determinant of actual and future inflation and thus matter for the conduct of monetary policy. We study how firms form their inflation expectations using quarterly firm-level data from the Bank of Canada’s Business Outlook Survey, spanning the 2001 to 2015 period.

I am honoured to address members of the Canadian Association for Business Economics. My remarks today will focus on critical issues that the Bank of Canada has studied over the past four years and how this research will inform our work as we move forward post crisis.

Deputy Governor Timothy Lane discusses the benefits and challenges of international capital mobility.

In his speech entitled “How People Think and How it Matters,” delivered to the Canadian Association for Business Economics, Deputy Governor Jean Boivin reviews various ways people form expectations and how these affect monetary policy.

The COVID-19 pandemic has caused an atypical recession in which some sectors of the economy boomed and others collapsed. This required a unique fiscal policy reaction to both support firms and stimulate activity in sectors with slack. Was fiscal policy able to get where it was needed? Mostly, yes.