Search

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.

Following the recent financial crisis, major central banks have introduced several types of unconventional monetary policy measures, including liquidity and credit facilities, asset purchases and forward guidance. To date, these measures appear to have been successful. They restored market functioning, facilitated the transmission of monetary policy and supported economic activity. They have potential costs, however, including challenges related to the greatly expanded balance sheets of central banks and the eventual exit from these measures, as well as the vulnerabilities that can arise from prolonged monetary accommodation.

The existence of downward nominal wage rigidity (DNWR) has often been used to justify a positive inflation target. It is traditionally assumed that positive inflation could “grease the wheels” of the labour market by putting downward pressure on real wages, easing labour market adjustments during a recession.

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.

Using Canadian matched employer-employee data, we show that working hours of different workers are gross complements in production rather than perfect substitutes, as is typically assumed by macroeconomic models of production.

In this paper, we study the impact of Canada’s adoption of protectionist trade policy in 1879 on Canadian welfare. Under the National Policy the Canadian average weighted tariff increased from 14% to 21%. The conventional view is that this was a distortionary policy that negatively affected Canadian welfare.

Worst-case analysis is used among financial regulators in the wake of the recent financial crisis to gauge the tail risk. We provide insight into worst-case analysis and provide guidance on how to estimate it. We derive the bias for the non-parametric heavy-tailed order statistics and contrast it with the semi-parametric extreme value theory (EVT) approach.

This paper introduces a new methodology to date systemic financial stress events in a transparent, objective and reproducible way. The financial cycle is captured by a monthly country-specific financial stress index.

This paper quantifies global demand, supply and uncertainty shocks and compares two major global recessions: the 2008–09 Great Recession and the COVID-19 pandemic. We use two alternate approaches to decompose economic shocks: text mining techniques on earnings calls transcripts and a structural Bayesian vector autoregression model.

This paper develops a travel-based metric to measure Canadians’ access to cash from automated banking machines (ABMs) and financial institution branches. We find that, overall, access to cash remained stable between 2019 and 2022. The total number of ABMs in Canada increased by 3.7% and the total number of branches decreased by 5.2% during that period.