Real and Nominal Frictions within the Firm: How Lumpy Investment Matters for Price Adjustment Staff Working Paper 2009-36 Michael K. Johnston Real rigidities are an important feature of modern sticky price models and are policy-relevant because of their welfare consequences, but cannot be structurally identified from time series. I evaluate the plausibility of capital specificity as a source of real rigidities using a two-dimensional generalized (s,S) model calibrated to micro evidence. Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary policy transmission JEL Code(s): E, E1, E12, E2, E22, E3, E31
Real Return Bonds, Inflation Expectations, and the Break-Even Inflation Rate Staff Working Paper 2004-43 Ian Christensen, Christopher Reid, Frédéric Dion According to the Fisher hypothesis, the gap between Canadian nominal and Real Return Bond yields (or break-even inflation rate) should be a good measure of inflation expectations. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Interest rates, Market structure and pricing JEL Code(s): E, E3, E31, E4, E43
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 Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Inflation and prices JEL Code(s): C, C3, C32, E, E3, E31, E32
Switching Between Chartists and Fundamentalists: A Markov Regime-Switching Approach Staff Working Paper 1996-1 Robert Vigfusson Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach, which bases the forecast on economic fundamentals, and the chartist approach, which bases the forecast on the past behaviour of the exchange rate. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets JEL Code(s): C, C4, C40, G, G1, G12
Central Bank Communication That Works: Lessons from Lab Experiments Staff Working Paper 2019-21 Oleksiy Kryvtsov, Luba Petersen We use controlled laboratory experiments to test the causal effects of central bank communication on economic expectations and to distinguish the underlying mechanisms of those effects. In an experiment where subjects learn to forecast economic variables, we find that central bank communication has a stabilizing effect on individual and aggregate outcomes and that the size of the effect varies with the type of communication. Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary policy implementation, Monetary policy transmission JEL Code(s): C, C9, D, D8, D84, E, E3, E5, E52
On the Nature and the Stability of the Canadian Phillips Curve Staff Working Paper 2001-4 Maral Kichian This paper empirically determines why, during the 1990s, inflation in Canada was consistently more stable than predicted by the fixed-coefficients Phillips curve. A time-varying-coefficient model, where all the parameters adjust simultaneously, shows that the behaviour of expectations was probably a major contributing factor. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Inflation and prices JEL Code(s): E, E3, E37
May 17, 2012 Understanding Systemic Risk in the Banking Sector: A MacroFinancial Risk Assessment Framework Bank of Canada Review - Spring 2012 Céline Gauthier, Moez Souissi The MacroFinancial Risk Assessment Framework (MFRAF) models the interconnections between liquidity and solvency in a financial system, with multiple institutions linked through an interbank network. The MFRAF integrates funding liquidity risk as an endogenous outcome of the interactions between solvency risk and the liquidity profiles of banks, which is a complementary approach to the new […] Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): E, E4, E44, G, G0, G01, G2, G21
The Impact of the Global Business Cycle on Small Open Economies: A FAVAR Approach for Canada Staff Working Paper 2011-2 Garima Vasishtha, Philipp Maier Building on the growing evidence on the importance of large data sets for empirical macroeconomic modeling, we use a factor-augmented VAR (FAVAR) model with more than 260 series for 20 OECD countries to analyze how global developments affect the Canadian economy. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, International topics JEL Code(s): C, C3, C32, F, F4, F41
Macroeconomic Uncertainty Through the Lens of Professional Forecasters Staff Working Paper 2016-5 Soojin Jo, Rodrigo Sekkel We analyze the evolution of macroeconomic uncertainty in the United States, based on the forecast errors of consensus survey forecasts of different economic indicators. Comprehensive information contained in the survey forecasts enables us to capture a real-time subjective measure of uncertainty in a simple framework. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C38, E, E1, E17, E3, E32
Why Fixed Costs Matter for Proof-of-Work Based Cryptocurrencies Staff Working Paper 2020-27 Rodney J. Garratt, Maarten van Oordt Can Bitcoin survive? Some say it will become vulnerable to attacks as the rewards for processing Bitcoin transactions continue to decline. The economics of fixed costs suggest the specialized hardware used to mine Bitcoin may be key to its survival. Content Type(s): Staff research, Staff working papers Research Topic(s): Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): G, G1, G10, L, L1, L11