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We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. Our model can generate more sizable inflation surges due to cost-push and demand shocks than a standard linearized model when inflation is high.

A low level of the neutral rate of interest increases the likelihood that a central bank’s policy rate will reach its effective lower bound (ELB) in future economic downturns. In a low neutral rate environment, using an extended monetary policy toolkit including forward guidance helps address the ELB challenge. Using the Bank’s Terms-of-Trade Economic Model, we assess the benefits and limitations of a state-contingent forward guidance implemented within a flexible inflation targeting framework.

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.

The official Chinese labour market indicators have been seen as problematic, given their small cyclical movement and their only-partial capture of the labour force. In our paper, we build a monthly Chinese labour market conditions index (LMCI) using text analytics applied to mainland Chinese-language newspapers over the period from 2003 to 2017.

Commodity prices are once again making headlines. Some commodity prices, such as those for copper and cattle, have reached record highs; others are rising quickly and approaching previous peaks.

In recent years, the Bank has put renewed emphasis on analyzing monetary variables and on developing models that incorporate money as an active part of the transmission mechanism. In this article, Dinah Maclean describes how the monetary aggregates are used in the formulation of monetary policy analysis at the Bank, outlining the key tools and models used. The most important money-based model currently in use is the M1-VECM. In this model, deviations in the money supply from the long-term demand for money cause changes in inflation. The author briefly describes the "active-money" paradigm underlying this model and explains the key equations within it. Other simpler empirical models are also outlined, including single-equation indicator models for output based on the narrow aggregates, a neural network, and a model based on the broader aggregate M2++. A detailed technical annex provides details on model equations and coefficient values.

In a cashless economy, would the private sector invest in the optimal level of safety in a deposit-based payment system? In general, because of externalities, the answer is no. While the private sector could over- or under-invest in safety, the government can use taxes or subsidies to correct private incentives.

The results of our 2017 Bitcoin Omnibus Survey (December 12 to 15, 2017) when compared with those from 2016 show that Bitcoin “awareness” increased from 64 to 85 per cent, while ownership increased from 2.9 to 5.0 per cent. Most Bitcoin purchasers are using the cryptocurrency as an investment and not as a means of payment for goods or services.

We analyze the dynamic and heterogeneous responses of small-business loan performance to a monetary-policy shock using loan-level data in Canada. We find evidence of monetary policy transmission through the cash-flow channel and the aggregate demand channel as well as some, though limited, impact of collateral to discipline loan repayment.

Causes and consequences of declining inflation persistence in Canada; the evolution of capital flows to emerging-market economies (EMEs) and the need for EMEs to implement policies that support capital flows; making bank notes accessible for Canadians living with blindness or low vision, sharing assessments of the suite of accessibility features on the current series of bank notes and plans for the next series.