The Impact of Unemployment Insurance and Unsecured Credit on Business Cycles Staff working paper 2023-22 Michael Irwin This paper studies how unsecured consumer credit impacts the extent to which unemployment insurance (UI) policies smooth aggregate consumption fluctuations over the business cycle. Using a general equilibrium real business cycle model, I find that unsecured credit amplifies the extent to which UI smooths cyclical consumption fluctuations. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E21, E24, E3, E32, E4, E44, E6, E62 Research Theme(s): Financial system, Household and business credit, Models and tools, Economic models, Monetary policy, Real economy and forecasting
Supply Drivers of US Inflation Since the COVID-19 Pandemic Staff working paper 2023-19 Serdar Kabaca, Kerem Tuzcuoglu This paper examines the contribution of several supply factors to US headline inflation since the start of the COVID-19 pandemic. We identify six supply shocks using a structural VAR model: labor supply, labor productivity, global supply chain, oil price, price mark-up and wage mark-up shocks. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C3, C32, E, E3, E31, E32 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Inflation dynamics and pressures
December 13, 1999 Feedback Rules for Inflation Control: An Overview of Recent Literature Bank of Canada Review - Winter 1999–2000 Agathe Côté, Jamie Armour Feedback rules are rules aimed at guiding policy-makers as they face the problem of keeping inflation close to a desired path without causing variability elsewhere in the economy. These rules link short-term interest rates, controlled by the central bank, to the rate of inflation and/or its deviation from a target rate. The authors describe the most popular types of feedback rules and review some simulation results. Content Type(s): Publications, Bank of Canada Review articles
October 26, 2010 Reform of Over-the-Counter (OTC) Derivatives Markets in Canada This discussion paper represents the work of the inter-agency Canadian OTC Derivatives Working Group (OTCD WG), formed in December 2009, that is chaired by the Bank of Canada and composed of members from the Office of the Superintendent of Financial Institutions (OSFI), the federal Department of Finance, the Ontario Securities Commission, the Autorité des marchés financiers, the Alberta Securities Commission and the Bank of Canada.
Central Bank Digital Currency and Banking Choices Staff working paper 2024-4 Jiaqi Li, Andrew Usher, Yu Zhu To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E5, E50, E58 Research Theme(s): Financial system, Financial institutions and intermediation, Financial stability and systemic risk, Money and payments, Digital assets and fintech, Payment and financial market infrastructures
Payments on Digital Platforms: Resiliency, Interoperability and Welfare Staff working paper 2021-19 Jonathan Chiu, Tsz-Nga Wong This paper studies the business model choice between running a cash platform and a token platform, as well as its welfare and policy implications. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E5, L, L5 Research Theme(s): Money and payments, Digital assets and fintech, Payment and financial market infrastructures, Retail payments
August 14, 1999 Passive Money, Active Money, and Monetary Policy Bank of Canada Review - Summer 1999 David Laidler This article by the Bank's visiting economist examines the role of money in the transmission of monetary policy. Professor Laidler argues against the view of money as a passive variable that reacts to changes in prices, output, and interest rates but has no direct causative effect on them. He maintains that the empirical evidence supports the view of money playing an active role in the transmission mechanism. While he agrees that individual monetary aggregates can be difficult to read because of instabilities in the demand-for-money function, he argues that monetary aggregates, particularly those relating to transactions money, should have a more significant place in the hierarchy of policy variables that the Bank considers when formulating monetary policy. Content Type(s): Publications, Bank of Canada Review articles
Evaluating the portfolio balance effects of the Government of Canada Bond Purchase Program on the Canadian yield curve Staff analytical note 2024-22 Antonio Diez de los Rios The Bank of Canada’s Government of Canada Bond Purchase Program, launched in response to the COVID-19 pandemic, lowered the weighted average maturity of the Government of Canada’s debt by approximately 1.4 years. This in turn reduced Canadian 10-year and 5-year zero-coupon yields by 84 and 52 basis points, respectively. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E4, E43, E5, E52, G, G1, G12, H, H6, H63 Research Theme(s): Financial markets and funds management, Market functioning, Monetary policy, Monetary policy tools and implementation
August 19, 2002 Models in Policy-Making Bank of Canada Review - Summer 2002 Donald Coletti, Stephen Murchison This article examines another strategy in the Bank's approach to dealing with an uncertain world: the use of carefully articulated models to produce economic forecasts and to examine the implications of the various risks to those forecasts. Economic models are deliberate simplifications of a complex world that allow economists to make predictions that are reasonably accurate and that can be easily understood and communicated. By using several models, based on competing paradigms, the Bank minimizes policy errors that could result from relying on one view of the world and one philosophy of model design. The authors review some of the models currently used at the Bank, as well as the role of judgment in the projection process. Content Type(s): Publications, Bank of Canada Review articles
November 13, 2014 Recent Developments in Experimental Macroeconomics Bank of Canada Review - Autumn 2014 Robert Amano, Oleksiy Kryvtsov, Luba Petersen This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted by Bank of Canada economists has shed light on a number of issues important to monetary policy, such as the relative efficacy between price-level and inflation targeting, and the nature of inflation expectations formation. Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): C, C9, E, E3, E31, E5, E52