Interpreting Volatility Shocks as Preference Shocks Staff working paper 2016-45 Shaofeng Xu This paper examines the relationship between volatility shocks and preference shocks in an analytically tractable endogenous growth model with recursive preferences and stochastic volatility. I show that there exists an explicit mapping between volatility shocks and preference shocks, and a rise in volatility generates the same impulse responses of macroeconomic aggregates as a negative preference shock. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E3 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting
The Paul Storer Memorial Lecture—Cross-Border Trade Integration and Monetary Policy Staff discussion paper 2016-20 Stephen S. Poloz In this paper we explore the nexus between cross-border trade integration and monetary policy. We first review the evidence that trade liberalization has increased the degree of integration in North America and conclude that, while robust structural inferences remain elusive, there is sufficient supporting evidence for central banks to treat the issue seriously. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E3, E37, E5, F, F1, F4, F41, F6 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Structural challenges, International trade, finance and competitiveness
On What States Do Prices Depend? Answers from Ecuador Staff working paper 2016-43 Craig Benedict, Mario J. Crucini, Anthony Landry In this paper, we argue that differences in the cost structures across sectors play an important role in firms’ decisions to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E5, F, F3, F33 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
The Global Benefits of Low Oil Prices: More Than Meets the Eye Staff analytical note 2016-13 Robert Fay, Justin-Damien Guénette, Louis Morel Between mid-2014 and early 2016, oil prices fell by roughly 65 per cent. This note documents the channels through which this oil price decline is expected to affect the global economy. One important and immediate channel is through higher expenditures, especially in net oil-importing countries. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, E32, E37, F, F0, F01, Q, Q4, Q43 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness
Implementing Cross-Border Interbank Lending in BoC-GEM-FIN Staff discussion paper 2016-19 Malik Shukayev, Argyn Toktamyssov BIS interbank lending data show that the Great Recession generated large and persistent changes in the international interbank lending positions of various countries. The main objective of this study is to understand the role of changes in international interbank credit flows in transmitting shocks across borders. Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E2, E27, E3, E37, F, F4, F47 Research Theme(s): Financial system, Financial institutions and intermediation, Models and tools, Economic models, Structural challenges, International trade, finance and competitiveness
Output Comovement and Inflation Dynamics in a Two-Sector Model with Durable Goods: The Role of Sticky Information and Heterogeneous Factor Markets Staff working paper 2016-36 Tomiyuki Kitamura, Tamon Takamura In a simple two-sector New Keynesian model, sticky prices generate a counterfactual negative comovement between the output of durable and nondurable goods following a monetary policy shock. We show that heterogeneous factor markets allow any combination of strictly positive price stickiness to generate positive output comovement. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E31, E32, E5, E52 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Low for Longer? Why the Global Oil Market in 2014 Is Not Like 1986 Staff analytical note 2016-11 Bahattin Buyuksahin, Reinhard Ellwanger, Kun Mo, Konrad Zmitrowicz In the second half of 2014, oil prices experienced a sharp decline, falling more than 50 per cent between June 2014 and January 2015. A cursory glance at this oil price crash suggests similarities to developments in 1986, when the price of oil declined by more than 50 per cent, initiating an episode of relatively low oil prices that lasted for more than a decade. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, Q, Q4, Q41, Q43 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Structural challenges, International trade, finance and competitiveness
Housing Market Dynamics and Macroprudential Policy Staff working paper 2016-31 Gabriel Bruneau, Ian Christensen, Césaire Meh We perform an analysis to determine how well the introduction of a countercyclical loanto- value (LTV) ratio can reduce household indebtedness and housing price fluctuations compared with a monetary policy rule augmented with house price inflation. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E31, E4, E42, H, H2, H23 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit, Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
Ce que révèle une analyse sectorielle des dynamiques récentes de l’inflation au Canada Staff analytical note 2016-7 Laurence Savoie-Chabot Decomposing total inflation in Canada as measured by the consumer price index (CPI) into its key macroeconomic factors, as presented in the most recent Monetary Policy Report, is an interesting exercise that shows how the exchange rate pass-through, commodity prices and the output gap have influenced the evolution of the total inflation rate over time. This aggregate approach, however, may mask important sectoral changes. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, E31 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Real economy and forecasting
Financial Crisis Interventions Staff working paper 2016-29 Josef Schroth This paper develops a model of an economy where bank credit supports both productive investment and individual consumption smoothing in the face of idiosyncratic income risk. Bank credit is constrained by bank equity capital. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E1, E13, E3, E32, E4, E44 Research Theme(s): Financial system, Financial stability and systemic risk, Financial system regulation and oversight, Household and business credit