International topics

• Is the Discretionary Income Effect of Oil Price Shocks a Hoax?

  Staff Working Paper 2017-50 Christiane Baumeister, Lutz Kilian, Xiaoqing Zhou

  The transmission of oil price shocks has been a question of central interest in macroeconomics since the 1970s. There has been renewed interest in this question after the large and persistent fall in the real price of oil in 2014–16. In the context of this debate, Ramey (2017) makes the striking claim that the existing literature on the transmission of oil price shocks is fundamentally confused about the question of how to quantify the effect of oil price shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C51, Q, Q4, Q43

• Product Sophistication and the Slowdown in Chinese Export Growth

  Staff Discussion Paper 2017-15 Mark Kruger, Walter Steingress, Sri Thanabalasingam

  Chinese real export growth decelerated considerably during the last decade. This paper argues that the slowdown largely resulted from China moving to a more sophisticated mix of exports: China produced more sophisticated goods over which it had pricing power instead of producing greater volumes of less sophisticated products.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Development economics, Exchange rates, International topics JEL Code(s): F, F1, F14, F17, O, O1, O10

• The Causal Impact of Migration on US Trade: Evidence from Political Refugees

  Staff Working Paper 2017-49 Walter Steingress

  Immigrants can increase international trade by shifting preferences towards the goods of their country of origin and by reducing bilateral transaction costs. Using geographical variation across U.S. states for the period 2008 to 2013, I estimate the respective causal impact of immigrants on U.S. exports and imports.

  Content Type(s): Staff research, Staff working papers Topic(s): International topics, Regional economic developments JEL Code(s): F, F1, F14, F2, F22, J, J6, J61
• November 16, 2017

  Factors Behind the 2014 Oil Price Decline

  Bank of Canada Review - Autumn 2017 Reinhard Ellwanger, Benjamin Sawatzky, Konrad Zmitrowicz

  Oil prices have declined sharply over the past three years. While both supply and demand factors played a role in the large oil price decline of 2014, global supply growth seems to have been the predominant force. The most important drivers were likely the surprising growth of US shale oil production, the output decisions of the Organization of the Petro-leum Exporting Countries and the weaker-than-expected global growth that followed the 2009 global financial crisis.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Business fluctuations and cycles, International topics, Recent economic and financial developments JEL Code(s): Q, Q4, Q41, Q43
• November 16, 2017

  An Update on the Neutral Rate of Interest

  Bank of Canada Review - Autumn 2017 José Dorich, Abeer Reza, Subrata Sarker

  The neutral rate serves as a benchmark for measuring monetary stimulus and provides a medium- to long-run anchor for the real policy rate. Global neutral rate estimates have been falling over the past few decades. Factors such as population aging, high corporate savings, and low trend productivity growth are likely to continue supporting a low global neutral rate. These global factors as well as domestic factors are exerting downward pres-sure on the Canadian real neutral rate, which is estimated to be between 0.5 to 1.5 per cent. This low neutral rate has important implications for monetary policy and financial stability.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates, International topics, Potential output, Recent economic and financial developments JEL Code(s): E, E4, E43, E5, E52, E58, F, F0, F01, F4, F43, O, O4

• Understanding the Time Variation in Exchange Rate Pass-Through to Import Prices

  Staff Discussion Paper 2017-12 Rose Cunningham, Min Jae Kim, Christian Friedrich, Kristina Hess

  In this paper, we analyze the presence of time variation in the pass-through from the nominal effective exchange rate to import prices for 24 advanced economies over the period 1995–2015. In line with earlier studies in the literature, we find substantial heterogeneity in the level of exchange rate pass-through across countries.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Exchange rates, Inflation and prices, International topics, Monetary policy transmission JEL Code(s): E, E3, E31, F, F3, F31, F4, F41