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.

It is commonly observed that central banks respond gradually to economic shocks, moving the interest rate in small discrete steps in the same direction over an extended period of time. This paper examines the empirical evidence regarding central banks' smoothing of interest rates, paying particular attention to the case of Canada.

Although the current inflation-targeting regime has served Canadians well, sound public policy demands the continuous exploration of possible improvements in the monetary policy framework.

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.

The sticky-price model of aggregate fluctuations implies that countries with high trend inflation rates should exhibit less-persistent output fluctuations than countries with low trend inflation.

We explain how the Bank of Canada’s policy models capture the trade-off between output and inflation in Canada. We provide new estimates of the trade-off and contrast them with those in the Bank’s macroeconomic models.

This issue focuses on the upcoming renewal of Canada’s inflation-control target. Bank researchers discuss the estimate of the lower bound to policy interest rates in Canada. They also discuss downward nominal wage rigidity and whether its presence warrants considering a higher inflation target. The third article highlights the experience some international central banks have had with unconventional monetary policies. The final article describes monetary policy frameworks in 10 advanced economies.

Offshoring has become an increasingly prominent aspect of the globalization process. Evidence over the past two decades suggests that offshoring has not exerted a noticeable impact on overall employment and earnings growth in advanced economies, but it has likely contributed to shifting the demand for labour towards higher-skilled jobs. There appear to be some positive effects of offshoring on productivity, but such effects differ by country.

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.

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.