Search

We introduce limited information in monetary policy. Agents receive signals from the central bank revealing new information (“news") about the future evolution of the policy rate before changes in the rate actually take place. However, the signal is disturbed by noise.

The common-factor hypothesis is one possible explanation for the housing wealth effect. Under this hypothesis, house price appreciation is related to changes in consumption as long as the available proxies for the common driver of housing and non-housing demand are noisy and housing supply is not perfectly elastic.

The last few weeks have been a time of turbulence in financial markets. In times such as these, it is common for people to focus on day-by-day or even hour-by-hour events, and to lose sight of the future. But tonight, I want to focus on the future; specifically, the future of inflation targeting in Canada.

This paper predicts phases of the financial cycle by using a continuous financial stress measure in a Markov switching framework. The debt service ratio and property market variables signal a transition to a high financial stress regime, while economic sentiment indicators provide signals for a transition to a tranquil state.

Various drivers of business investment can be used to explain the underwhelming performance of investment in advanced economies since the global financial crisis, particularly since 2014. The slow growth in aggregate demand cannot by itself explain the full extent of the recent weakness in investment, which appears to be linked primarily to the collapse of global commodity prices and a rise in economic uncertainty. Looking ahead, business investment growth is likely to remain slower than in the pre-crisis period, largely because of structural factors such as population aging.

At the onset of the pandemic, the Bank of Canada transitioned its framework for monetary policy implementation from a corridor system to a floor system, which it has since decided to maintain. We provide a comprehensive analysis of both frameworks and assess their relative merits based on five key criteria that define a sound framework.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

This paper presents Bank of Canada staff’s current assessment of the US neutral rate, along with a newly developed set of models on which that assessment is based. The overall assessment is that the US neutral rate currently lies in a range of 1.75 to 2.75 percent.

This article discusses three scenarios for the adjustment of the global economy. In a “baseline” scenario—which encompasses fiscal consolidation in major advanced economies, growth-friendly structural reforms in Europe and Japan, and greater exchange rate flexibility and reforms in the emerging-market economies of Asia to induce rotation of demand away from net exports—global current account imbalances […]