E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit

• Expectations and Monetary Policy: Experimental Evidence

  Staff Working Paper 2013-44 Oleksiy Kryvtsov, Luba Petersen

  The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business-cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and the output gap by at least two-thirds.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Monetary policy implementation, Monetary policy transmission JEL Code(s): C, C9, D, D8, D84, E, E3, E5, E52

• Central Bank Communications Before, During and After the Crisis: From Open-Market Operations to Open-Mouth Policy

  Staff Working Paper 2013-41 Ianthi Vayid

  The days when secrecy and opacity were the bywords of central banking are gone. The advent of inflation targeting in the early 1990s acted as the catalyst for enhanced transparency and communications in the conduct of monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Credibility, Financial stability, Inflation targets, Monetary policy framework, Monetary policy implementation JEL Code(s): E, E5, E52, E58

• ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model

  Technical Report No. 100 José Dorich, Michael K. Johnston, Rhys R. Mendes, Stephen Murchison, Yang Zhang

  This report provides a detailed technical description of an updated version of the Terms-of-Trade Economic Model (ToTEM II), which replaced ToTEM (Murchison and Rennison 2006) in June 2011 as the Bank of Canada’s quarterly projection model for Canada.

  Content Type(s): Staff research, Technical reports Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E1, E17, E2, E20, E3, E30, E4, E40, E5, E50, F, F4, F41

• The Common Component of CPI: An Alternative Measure of Underlying Inflation for Canada

  Staff Working Paper 2013-35 Mikael Khan, Louis Morel, Patrick Sabourin

  In this paper, the authors propose a measure of underlying inflation for Canada obtained from estimating a monthly factor model on individual components of the CPI. This measure, labelled the common component of CPI, has intuitive appeal and a number of interesting features.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Inflation and prices, Monetary policy framework JEL Code(s): C, C1, E, E3, E31, E32, E5, E52, E58

• Money Market Rates and Retail Interest Regulation in China: The Disconnect between Interbank and Retail Credit Conditions

  Staff Working Paper 2013-20 Nathan Porter, TengTeng Xu

  Interest rates in China are composed of a mix of both market-determined interest rates (interbank rates and bond yields), and regulated interest rates (retail lending and deposit rates), reflecting China’s gradual process of interest rate liberalization.

  Content Type(s): Staff research, Staff working papers Topic(s): Development economics, Econometric and statistical methods, Financial markets, Monetary policy framework, Monetary policy transmission JEL Code(s): C, C2, C22, E, E4, E43, E5, E52, E58
• May 16, 2013

  Unconventional Monetary Policies: Evolving Practices, Their Effects and Potential Costs

  Bank of Canada Review - Spring 2013 Lena Suchanek, Eric Santor

  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.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial markets, International topics, Monetary policy framework JEL Code(s): E, E5, E52, E58, E6, E65

• Countercyclical Bank Capital Requirement and Optimized Monetary Policy Rules

  Staff Working Paper 2013-8 Carlos De Resende, Ali Dib, René Lalonde, Nikita Perevalov

  Using BoC-GEM-Fin, a large-scale DSGE model with real, nominal and financial frictions featuring a banking sector, we explore the macroeconomic implications of various types of countercyclical bank capital regulations. Results suggest that countercyclical capital requirements have a significant stabilizing effect on key macroeconomic variables, but mostly after financial shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial institutions, Financial stability, International topics JEL Code(s): E, E3, E32, E4, E44, E5, G, G1, G2

• The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications

  Staff Working Paper 2013-1 Olivier Coibion, Yuriy Gorodnichenko, Gee Hee Hong

  We study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) using data on prices and quantities sold for numerous retailers across many U.S. metropolitan areas.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E3, E4, E5