There appears to be a disconnect between the importance of the zero bound on nominal interest rates in the real-world and predictions from quantitative DSGE models. Recent economic events have reinforced the relevance of the zero bound for monetary policy whereas quantitative models suggest that...

Using an error-correction model (ECM) framework, the authors attempt to quantify the degree of disequilibrium in Canadian housing stock over the period 1961–2008 for the national aggregate and over 1981–2008 for the provinces. They find that, based on quarterly data, the level of housing...

In a small open economy fluctuations in the real exchange rate can affect plant turnover, and thus aggregate productivity, by altering the makeup of plants that populate the market. An appreciation of the local currency increases the level of competition in the domestic market as import...

This paper surveys the empirical literature on the benefits of low inflation emphasizing contributions since 1990. It follows the framework of a section in the Bank's 1990 Annual Report, "The Benefits of Price Stability." This framework looks at the costs of inflation, or the benefits of price...

In this report, the authors examine and compare twelve private and public sector models of the Canadian economy with respect to their paradigm, structure, and dynamic properties. These open-economy models can be grouped into two economic paradigms. The first is the "conventional" paradigm (or...

This paper studies the implications of certain kinds of uncertainty for monetary policy. It first describes the optimum policy rule in a simple model of the transmission mechanism as in Ball and Svensson. It then examines how this rule ought to be modified when there is uncertainty about the...

This paper first describes the Bank of Canada’s approach to the design of large-value clearing and settlement systems. It then examines the way the Bank has operated under the Payment Clearing and Settlement Act, passed by Parliament in July 1996. Through this act, the Bank was assigned...

With the demise of monetary targeting over the past 20 years in many major countries, the question has arisen as to whether central banks should look at money at all when formulating and conducting monetary policy. The author argues that the mainstream paradigm, which gives no useful role to...

This paper examines the major changes in the Canadian banking system since the Second World War, with special attention paid to the differences between Canadian and US developments over this period. An important difference between the countries is the nationwide branch banking arrangements in...

The level of potential output plays a central role in the Bank of Canada's new Quarterly projection Model (QPM). This report, the fourth in a series documenting QPM, descridbes a general method to measure potential output, as well as its implementation in the QPM system.