This paper analyzes the implications of the global financial cycle for conventional and unconventional monetary policies and macroprudential policy in small, open economies such as Canada. The paper starts by summarizing recent work on financial cycles and their growing correlation across...

Monetary policy implementation could, in theory, be constrained by deeply negative rates since overnight market participants may have an incentive to invest in cash rather than lend to other participants. To understand the functioning of overnight markets in such an environment, we add the...

24/7 payment settlement may impact the demand for central bank reserves and thus could have an effect on monetary policy implementation. Using the standard workhorse model of monetary policy implementation (Poole, 1968), we show that 24/7 payment settlement induces a precautionary demand for...

How should independent central banks react if pressured by fiscal policymakers? We study an environment with strategic monetary-fiscal interactions where the central bank has a limited degree of commitment to follow policies over time and the fiscal authority has none. We contrast the...

Predicting the economy's short-term dynamics-a vital input to economic agents' decisionmaking process-often uses lagged indicators in linear models. This is typically sufficient during normal times but could prove inadequate during crisis periods such as COVID-19. This paper demonstrates: (a)...

The COVID-19 pandemic and the resulting public health mitigation have caused large-scale economic disruptions globally. During this time, there is an increased need to predict the macroeconomy's short-term dynamics to ensure the effective implementation of fiscal and monetary policy. However,...

We investigate how the COVID-19 pandemic has changed consumers' payments habits in Canada. We rely on high-frequency data on cash withdrawals and debit card transactions from Interac Corp. and Canada's Automated Clearing Settlement System. We construct daily measures of payment habits reflecting...

Press releases announcing and explaining monetary policy decisions play a critical role in the communication strategy of central banks. Because of their market-moving potential, it is particularly important how they are drafted. Often, central banks start from the previous statement and update...

We use narrative evidence along with a novel database of real-time data and forecasts from the Bank of Canada's staff economic projections from 1974 to 2015 to construct a new measure of monetary policy shocks and estimate the effects of monetary policy in Canada. We show that it is crucial to...

Recent international experience with the effective lower bound on nominal interest rates has rekindled interest in the benefits of inflation targets above 2 per cent. We evaluate whether an increase in the inflation target to 3 or 4 per cent could improve macroeconomic stability in the Canadian...