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...

We propose a new empirical framework that jointly decomposes the conditional variance of economic time series into a common and a sector-specific uncertainty component. We apply our framework to a large dataset of disaggregated industrial production series for the US economy. Our results...

We forecast recessions in Canada using an autoregressive (AR) probit model. In this model, the presence of the lagged latent variable, which captures the autocorrelation in the recession binary variable, results in an intractable likelihood with a high dimensional integral. Therefore, we employ...

This paper studies the role of narratives for macroeconomic fluctuations. We micro-found narratives as directed acyclic graphs and show how exposure to different narratives can affect expectations in an otherwise standard macroeconomic model. We capture such competing narratives in news media's...

This paper compares the performance of simple inflation targeting (IT) and price-level path targeting (PLPT) rules to stabilize the macroeconomy, in response to a series of shocks, similar to those seen in Canada and the United States over the 1983 to 2004 period. The analysis is conducted in a...

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...

We propose a portfolio-balance model of the yield curve in which inflation is determined through an interest rate rule that satisfies the Taylor principle. Because arbitrageurs care about their real wealth, they only absorb an increase in the supply of nominal bonds if they are compensated with...

We compare the Federal Reserve's asset purchase programs with those implemented by the Bank of England and the Swedish Riksbank, and the Swiss National Bank’s reserve expansion program. We decompose government bond yields into (i) an expectations component, (ii) a global term premium and (iii)...

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...