F4 - Macroeconomic Aspects of International Trade and Finance

• 2020 US Neutral Rate Assessment

  Staff Discussion Paper 2020-12 James Bootsma, Thomas J. Carter, Xin Scott Chen, Christopher Hajzler, Argyn Toktamyssov

  This paper presents Bank of Canada staff’s current assessment of the US neutral rate, along with a newly developed set of models on which that assessment is based. The overall assessment is that the US neutral rate currently lies in a range of 1.75 to 2.75 percent.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41

• Production Networks and the Propagation of Commodity Price Shocks

  Staff Working Paper 2020-44 Shutao Cao, Wei Dong

  We examine the macro implications of commodity price shocks in a model with multiple production sectors that are interconnected within a commodity-exporting small open economy.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, International topics JEL Code(s): D, D5, D57, F, F4, F41

• The neutral rate in Canada: 2020 update

  Staff Analytical Note 2020-24 Dmitry Matveev, Julien McDonald-Guimond, Rodrigo Sekkel

  The neutral rate of interest is important for central banks because it helps measure the stance of monetary policy. We present updated estimates of the neutral rate in Canada using the most recent data. We expect the COVID-19 pandemic to significantly affect the fundamental drivers of the Canadian neutral rate.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41

• Monetary Policy Independence and the Strength of the Global Financial Cycle

  Staff Working Paper 2020-25 Christian Friedrich, Pierre Guérin, Danilo Leiva-Leon

  We propose a new strength measure of the global financial cycle by estimating a regime-switching factor model on cross-border equity flows for 61 countries. We then assess how the strength of the global financial cycle affects monetary policy independence, which is defined as the response of central banks' policy interest rates to exogenous changes in inflation.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Exchange rate regimes, Financial system regulation and policies, International financial markets, Monetary policy JEL Code(s): E, E4, E5, F, F3, F32, F4, F42, G, G1, G15, G18

• IMPACT: The Bank of Canada’s International Model for Projecting Activity

  Technical Report No. 116 Patrick Blagrave, Claudia Godbout, Justin-Damien Guénette, René Lalonde, Nikita Perevalov

  We present the structure and features of the International Model for Projecting Activity (IMPACT), a global semi-structural model used to conduct projections and policy analysis at the Bank of Canada. Major blocks of the model are developed based on the rational error correction framework of Kozicki and Tinsley (1999), which allows the model to strike a balance between theoretical structure and empirical performance.

  Content Type(s): Staff research, Technical reports Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Economic models, International topics JEL Code(s): C, C6, C68, E, E2, E27, E3, E37, F, F0, F01, F3, F32, F4, F47