May 15, 2000 Credibility and Monetary Policy Bank of Canada Review - Spring 2000 Patrick Perrier, Robert Amano A highly credible monetary policy helps to reduce the degree of uncertainty that can surround the objectives of such policy. When the monetary policy pursued by the central bank is credible, the expectations of the public are focused on a target. If the public believes that the Bank will act to bring inflation back to the target, then its expectations will not react so strongly to fluctuating price trends. In turn, fluctuations in inflation, interest rates, output, and employment should be less pronounced than in the absence of such credibility. The adoption of inflation control as a monetary policy objective by some countries has led central banks to take steps to enhance the credibility of monetary policy. For the Bank of Canada, these include * the publication of our Monetary Policy Report each May and November, with formal updates each February and August * the initiation of communications activities across the country * the use of the overnight interest rate as a short-term operating target * the issuing of a press release each time the Bank changes its key rates To date, most of the studies on this topic have concluded that success in keeping inflation within a target range has helped to increase the credibility of Canadian monetary policy. These surveys suggest that expected inflation, which stood at about 5 per cent in 1990, declined to around 2 per cent by 1999 (Chart 1, page 15). Indeed, according to these surveys, for the entire period during which the Bank has had a target range for inflation, expected inflation rates have remained within that range. Inflation expectations have also reacted very little to changes in the total CPI, suggesting that the targets have helped to focus expectations on the target rate and have thus enhanced the credibility of monetary policy (Chart 2, page 16). One particular study shows that the life of collective wage agreements in Canada has been increasing and that the number of such agreements containing cost-of-living adjustment (COLA) clauses has steadily declined. The authors of this study suggest that this may reflect the greater credibility of Canadian monetary policy (Table 1, page 16). The proportion of mortgages with five-year terms is now higher than it was in the mid-1980s, and many financial institutions have been offering 7- to 10-year mortgages. This also suggests that inflation targets have gained credibility. Content Type(s): Publications, Bank of Canada Review articles
On the Tail Risk Premium in the Oil Market Staff working paper 2017-46 Reinhard Ellwanger This paper shows that changes in market participants’ fear of rare events implied by crude oil options contribute to oil price volatility and oil return predictability. Using 25 years of historical data, we document economically large tail risk premia that vary substantially over time and significantly forecast crude oil futures and spot returns. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C5, C53, C58, D, D8, D84, E, E4, E44, G, G1, G12, G13, Q, Q4, Q43 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial stability and systemic risk, Monetary policy, Inflation dynamics and pressures, Structural challenges, International trade, finance and competitiveness
Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies Staff working paper 2017-5 Ben Fung, Scott Hendry, Warren E. Weber This paper studies the period in Canada when both private bank notes and government-issued notes (Dominion notes) were simultaneously in circulation. Because both of these notes shared many of the characteristics of today's digital currencies, the experience with these notes can be used to draw lessons about how digital currencies might perform. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E41, E42, E5, E58 Research Theme(s): Money and payments, Cash and bank notes, Digital assets and fintech
Non-homothetic Preferences and the Demand Channel of Inflation Staff working paper 2025-30 Stephen Murchison An alternative to the standard CES aggregator, based on non-homothetic household preferences, is proposed. Specifically, the elasticity of substitution between goods declines during periods of strong per-capita consumption and vice versa, giving firms an incentive to adjust their desired markup in response to the state of demand. Empirical evidence favouring a direct role for per-capita consumption demand in inflation determination for Canada is presented. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E27, E5, E52, Q, Q4, Q43, Q5, Q58 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures
Household financial vulnerabilities and physical climate risks Staff analytical note 2021-19 Thibaut Duprey, Colin Jones, Callie Symmers, Geneviève Vallée Natural disasters occur more often than before, potentially exposing households to financial distress. We study the intersection between household financial vulnerabilities and severe weather events. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C2, C21, C3, C38, D, D1, D14, Q, Q5, Q54 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit, Structural challenges, Climate change
August 24, 2004 Bank of Canada Review - Summer 2004 Cover page Promissory Note, 1712 The note measures 28 cm x 16 cm and forms part of the National Currency Collection, Bank of Canada. Photography by Gord Carter, Ottawa Content Type(s): Publications, Bank of Canada Review
May 1, 2013 Monetary Policy After the Fall Remarks Mark Carney Eric J. Hanson Memorial Lecture University of Alberta Edmonton, Alberta Bank of Canada Governor Mark Carney discusses the future of monetary policy. Content Type(s): Press, Speeches and appearances, Remarks
February 5, 2020 Our Economic Destiny: Written in R-stars? Remarks Carolyn A. Wilkins Economic Club of Canada Toronto, Ontario Senior Deputy Governor Carolyn A. Wilkins talks about how to navigate slow growth and discusses the types of policies that would help secure long-term prosperity. Content Type(s): Press, Speeches and appearances, Remarks Subject(s): Financial system, Financial stability, Monetary policy, Economic models, Economy/Economic growth, Inflation targeting framework
December 13, 2021 Monetary Policy Framework Renewal (December 2021) Commentary and technical data relating to the 2021 renewal. Content Type(s): Background materials
Swedish Riksbank Notes and Enskilda Bank Notes: Lessons for Digital Currencies Staff working paper 2018-27 Ben Fung, Scott Hendry, Warren E. Weber This paper examines the experience of Sweden with government notes and private bank notes to determine how well the Swedish experience corresponds to that of Canada and the United States. Sweden is important to study because it has had government notes in circulation for more than 350 years, and it had government notes before private bank notes. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E41, E42, E5, E58 Research Theme(s): Money and payments, Cash and bank notes, Digital assets and fintech