Monetary policy transmission

• Understanding Monetary Policy and its Effects: Evidence from Canadian Firms Using the Business Outlook Survey

  Staff Working Paper 2017-24 Matthieu Verstraete, Lena Suchanek

  This paper shows (i) that business sentiment, as captured by survey data, matters for monetary policy decisions in Canada, and (ii) how business perspectives are affected by monetary policy shocks. Measures of business sentiment (soft data) are shown to have systematic explanatory power for monetary policy decisions over and above typical Taylor rule variables.

  Content Type(s): Staff research, Staff working papers Topic(s): Firm dynamics, Interest rates, Monetary policy transmission JEL Code(s): D, D2, D22, E, E4, E44, E5, E52

• What Explains Month-End Funding Pressure in Canada?

  Staff Discussion Paper 2017-9 Christopher S. Sutherland

  The Canadian overnight repo market persistently shows signs of latent funding pressure around month-end periods. Both the overnight repo rate and Bank of Canada liquidity provision tend to rise in these windows. This paper proposes three non-mutually exclusive hypotheses to explain this phenomenon.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Interest rates, Monetary policy framework, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E4, E41, E43, E5, E52, E58, F, F3, F36, G, G1, G14, G15, G2, G21
• May 11, 2017

  Unconventional Monetary Policy: The Perspective of a Small Open Economy

  Bank of Canada Review - Spring 2017 Jean-Sébastien Fontaine, Lena Suchanek, Jing Yang

  How do unconventional monetary policies like quantitative easing and negative interest rates affect domestic financial conditions and the broader economy in small open econo-mies, such as Canada? These policies are effective in depreciating the exchange rate in small open economies, while lower interest rates are also passed through to the economy, albeit only partially. When conventional monetary policy is close to its limits, fiscal policy may be a more important complement to monetary policy in a small economy, particularly if global demand for safe assets compresses long-term interest rates.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates, Monetary policy framework, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E5, E52, E58, E6, E61, E65
• April 18, 2017

  Blame It on the Machines?

  Remarks Carolyn A. Wilkins Toronto Region Board of Trade Toronto, Ontario

  Senior Deputy Governor Carolyn A. Wilkins discusses how automation could affect productivity and the Bank’s monetary policy.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): International topics, Labour markets, Market structure and pricing, Monetary policy transmission, Potential output, Productivity

• Monetary Policy, Private Debt and Financial Stability Risks

  Staff Working Paper 2016-59 Gregory Bauer, Eleonora Granziera

  Can monetary policy be used to promote financial stability? We answer this question by estimating the impact of a monetary policy shock on private-sector leverage and the likelihood of a financial crisis. Impulse responses obtained from a panel VAR model of 18 advanced countries suggest that the debt-to-GDP ratio rises in the short run following an unexpected tightening in monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Monetary policy, Monetary policy transmission JEL Code(s): C, C2, C21, C23, E, E5, E52, E58

• Quantitative Easing in a Small Open Economy: An International Portfolio Balancing Approach

  Staff Working Paper 2016-55 Serdar Kabaca

  This paper studies the effects of quantitative easing (QE) in a small open economy dynamic stochastic general-equilibrium model with international portfolio balancing. Portfolios are classified as imperfectly substitutable short-term and long-term subportfolios, each including domestic and foreign bonds.

  Content Type(s): Staff research, Staff working papers Topic(s): International topics, Monetary policy transmission JEL Code(s): E, E5, E52, F, F4, F41

• Comparing Forward Guidance and Neo-Fisherianism as Strategies for Escaping Liquidity Traps

  Staff Analytical Note 2016-16 Robert Amano, Thomas J. Carter, Rhys R. Mendes

  What path should policy-makers select for the nominal rate when faced with a liquidity trap during which the effective lower bound binds?

  Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Economic models, Inflation and prices, Interest rates, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E4, E5
• November 17, 2016

  Market Operations and Liquidity Provision at the Bank of Canada

  Bank of Canada Review - Autumn 2016 Mark de Guzman

  The Bank of Canada’s framework for market operations and liquidity provision describes how and when central bank liquidity might be offered with regards to the implementation of monetary policy and for supporting the stability of the Canadian financial system. Market participants can therefore plan their transactions knowing that the Bank stands ready to help manage system liquidity to support its objectives for monetary policy and financial stability.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets, Financial stability, Monetary policy framework, Monetary policy implementation, Monetary policy transmission, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E52, E58, G, G0, G01

• Monetary Policy Tradeoffs Between Financial Stability and Price Stability

  Staff Working Paper 2016-49 Malik Shukayev, Alexander Ueberfeldt

  We analyze the impact of interest rate policy on financial stability in an environment where banks can experience runs on their short-term liabilities, forcing them to sell assets at fire-sale prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial stability, Monetary policy framework, Monetary policy transmission JEL Code(s): D, D6, D62, E, E3, E32, E4, E44, G, G0, G01
• September 26, 2016

  Cross-Border Trade Integration and Monetary Policy

  Lecture Stephen S. Poloz Western Washington University Bellingham, Washington

  Governor Stephen S. Poloz discusses global trade integration and the implications for the conduct of monetary policy.

  Content Type(s): Press, Speeches and appearances, Lectures Topic(s): Central bank research, Economic models, Monetary policy, Monetary policy implementation, Monetary policy transmission, Trade integration