Interpreting Money-Supply and Interest-Rate Shocks as Monetary-Policy Shocks Staff Working Paper 1996-8 Marcel Kasumovich In this paper two shocks are analysed using Canadian data: a money-supply shock ("M-shock") and an interest-rate shock ("R-shock"). Money-supply shocks are derived using long-run restrictions based on long-run propositions of monetary theory. Thus, an M-shock is represented by an orthogonalized innovation in the trend shared by money and prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary and financial indicators, Monetary policy transmission JEL Code(s): E, E4, E43, E5, E51
Estimating DSGE-Model-Consistent Trends for Use in Forecasting Staff Working Paper 2009-35 Jean-Philippe Cayen, Marc-André Gosselin, Sharon Kozicki The workhorse DSGE model used for monetary policy evaluation is designed to capture business cycle fluctuations in an optimization-based format. It is commonplace to log-linearize models and express them with variables in deviation-from-steady-state format. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E5, E52
On the Nexus of Monetary Policy and Financial Stability: Effectiveness of Macroprudential Tools in Building Resilience and Mitigating Financial Imbalances Staff Discussion Paper 2016-11 H. Evren Damar, Miguel Molico This paper reviews the Canadian and international evidence of the effectiveness of macroprudential policy measures in building resilience and mitigating financial imbalances. The analysis concludes that these measures have broadly achieved their goal of increasing the overall resilience of the financial system to the buildup of imbalances and increasing the financial system’s ability to withstand adverse shocks. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies JEL Code(s): E, E5, E51, E58, G, G1, G18, G2, G28
The Welfare Implications of Fiscal Dominance Staff Working Paper 2008-28 Carlos De Resende, Nooman Rebei This paper studies the interdependence between fiscal and monetary policy in a DSGE model with sticky prices and non-zero trend inflation. We characterize the fiscal and monetary policies by a rule whereby a given fraction k of the government debt must be backed by the discounted value of current and future primary surpluses. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Fiscal policy, Inflation: costs and benefits, Monetary policy framework JEL Code(s): E, E3, E31, E4, E42, E5, E50, E6, E63
Non-Linearities, Model Uncertainty, and Macro Stress Testing Staff Working Paper 2008-30 Miroslav Misina, David Tessier A distinguishing feature of macro stress testing exercises is the use of macroeconomic models in scenario design and implementation. It is widely agreed that scenarios should be based on "rare but plausible" events that have either resulted in vulnerabilities in the past or could do so in the future. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability JEL Code(s): C, C1, C15, G, G2, G21, G3, G33
August 18, 2011 The BoC-GEM-Fin: Banking in the Global Economy Bank of Canada Review - Summer 2011 Carlos De Resende, René Lalonde This article describes the Bank of Canada’s version of the Global Economy Model structured to incorporate an active banking system that features an interbank market and cross-border lending. After describing the new model, the authors use it to examine the responses of selected U.S. and Canadian macroeconomic variables to a “credit crunch” in the United States and also to study the impact of changes in the regulatory limits to bank leverage in Canada. They also discuss the relative merits of a monetary policy framework based on inflation targeting and one based on price-level targeting in the presence of shocks to the U.S. and Canadian banking sectors. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Economic models, Financial institutions, Financial system regulation and policies, Monetary policy framework
A Semiparametric Early Warning Model of Financial Stress Events Staff Working Paper 2013-13 Ian Christensen, Fuchun Li The authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial stability JEL Code(s): C, C1, C12, C14, G, G0, G01, G1, G17
Downward Nominal Wage Rigidity, Inflation and Unemployment: New Evidence Using Micro‐Level Data Staff Analytical Note 2017-6 Dany Brouillette, Natalia Kyui Recent evidence suggests that the extent of downward nominal wage rigidity (DNWR) in the Canadian labour market has risen following the 2008–09 recession (see Brouillette, Kostyshyna and Kyui 2016). Content Type(s): Staff research, Staff analytical notes Research Topic(s): Econometric and statistical methods, Inflation and prices, Labour markets JEL Code(s): E, E2, E24, E3, E31, J, J3, J30
Micro Foundations of Price-Setting Behaviour: Evidence from Canadian Firms Staff Working Paper 2007-31 Daniel de Munnik, Kuan Xu How do firms adjust prices in the marketplace? Do they tend to adjust prices infrequently in response to changes in market conditions? If so, why? These remain key questions in macroeconomics, particularly for central banks that work to keep inflation low and stable. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Monetary policy transmission JEL Code(s): D, D4, D40, E, E3, E30, L, L1, L11
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