Forward Guidance and Expectation Formation: A Narrative Approach Staff working paper 2020-40 Christopher S. Sutherland How exactly does forward guidance influence interest rate expectations? Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, D83, D84, E, E3, E37, E5, E52, E58 Research Theme(s): Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation
November 11, 2008 The Role of Dealers in Providing Interday Liquidity in the Canadian-Dollar Market Bank of Canada Review - Winter 2008-2009 Chris D'Souza Access to information about the future direction of the exchange rate can be extremely valuable in the foreign exchange market. Evidence presented in this article suggests that Canadian dealers are more likely to provide interday liquidity to foreign, rather than Canadian, financial customers, since foreign financial flows can be more informative about future movements in the exchange rate. The author reveals a statistical relationship between the supply of liquidity provided by non-financial firms and that provided by dealing institutions across time, and across markets, and suggests that the relationship between the positions of commercial clients and market-makers, and the role played by dealers in interday liquidity provision, has been understated in the market microstructure literature. Content Type(s): Publications, Bank of Canada Review articles
Understanding the Time Variation in Exchange Rate Pass-Through to Import Prices Staff discussion paper 2017-12 Rose Cunningham, Min Jae Kim, Christian Friedrich, Kristina Hess In this paper, we analyze the presence of time variation in the pass-through from the nominal effective exchange rate to import prices for 24 advanced economies over the period 1995–2015. In line with earlier studies in the literature, we find substantial heterogeneity in the level of exchange rate pass-through across countries. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E3, E31, F, F3, F31, F4, F41 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Structural challenges, International trade, finance and competitiveness
May 19, 2011 Understanding and Measuring Liquidity Risk: A Selection of Recent Research Bank of Canada Review - Spring 2011 Céline Gauthier, Hajime Tomura During the recent financial crisis, one of the forces set in motion by the initial losses on subprime-mortgage loans was a significant decline in the market liquidity of assets and in the ability of financial institutions to obtain funding in wholesale markets. In this article, the authors summarize recent research that clarifies the role of liquidity in destabilizing the financial system and examine the implications of this research for the recently announced financial system reforms, including Basel III. Content Type(s): Publications, Bank of Canada Review articles
November 19, 2010 Has Exchange Rate Pass-Through Really Declined? Some Recent Insights from the Literature Bank of Canada Review - Autumn 2010 Jeannine Bailliu, Wei Dong, John Murray Building on an earlier Review article, the authors critically reassess the premise that exchange rate pass-through (ERPT) has declined in light of recent studies of the issue in the context of a dynamic stochastic general-equilibrium framework. Content Type(s): Publications, Bank of Canada Review articles
The Paul Storer Memorial Lecture—Cross-Border Trade Integration and Monetary Policy Staff discussion paper 2016-20 Stephen S. Poloz In this paper we explore the nexus between cross-border trade integration and monetary policy. We first review the evidence that trade liberalization has increased the degree of integration in North America and conclude that, while robust structural inferences remain elusive, there is sufficient supporting evidence for central banks to treat the issue seriously. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E3, E37, E5, F, F1, F4, F41, F6 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Structural challenges, International trade, finance and competitiveness
Noisy Monetary Policy Staff working paper 2018-23 Tatjana Dahlhaus, Luca Gambetti 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. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C18, C3, C32, E, E0, E02, E4, E43, E5, E52 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation
Can the Common-Factor Hypothesis Explain the Observed Housing Wealth Effect? Staff working paper 2016-62 Narayan Bulusu, Jefferson Duarte, Carles Vergara-Alert 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. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E21, R, R3, R31 Research Theme(s): Financial system, Household and business credit, Models and tools, Economic models, Monetary policy, Real economy and forecasting
Assessing global potential output growth and the US neutral rate: April 2023 Staff analytical note 2023-5 Salma Ahmed, Aviel Avshalumov, Tania Chaar, Eshini Ekanayake, Helen Lao, Louis Poirier, Jenna Rolland-Mills, Argyn Toktamyssov, Lin Xiang We expect global potential output growth to increase from 2.5% in 2022 to 2.8% by 2026. Compared with the April 2022 staff assessment, global potential output growth is marginally slower. The current range for the US neutral rate is 2% to 3%, unchanged from the last annual assessment. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E1, E2, E4, E5, F, F0, O, O4 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply
June 21, 2009 Procyclicality and Compensation Financial System Review - June 2009 Étienne Bordeleau, Walter Engert Content Type(s): Publications, Financial System Review articles