E31 - Price Level; Inflation; Deflation

• A Comprehensive Evaluation of Measures of Core Inflation in Canada: An Update

  Staff Discussion Paper 2019-9 Helen Lao, Ceciline Steyn

  We provide an updated evaluation of the value of various measures of core inflation that could be used in the conduct of monetary policy. We find that the Bank of Canada’s current preferred measures of core inflation—CPI-trim, CPI-median and CPI-common—continue to outperform alternative core measures across a range of criteria.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Inflation and prices, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52

• Exploring Wage Phillips Curves in Advanced Economies

  Staff Discussion Paper 2019-8 Rose Cunningham, Vikram Rai, Kristina Hess

  We investigate the extent to which excess supply (demand) in labour markets contributes to a lower (higher) growth rate of average nominal wages for workers. Using panel methods on data from 10 advanced economies for 1992–2018, we produce reduced-form estimates of a wage Phillips curve specification that is consistent with a New Keynesian framework.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Inflation and prices, Labour markets, Monetary Policy JEL Code(s): C, C3, C33, E, E3, E31, E32

• Drivers of Weak Wage Growth in Advanced Economies

  Staff Analytical Note 2019-3 Anne-Katherine Cormier, Michael Francis, Kristina Hess, Guillaume Poulin-Bellisle

  Since the global financial crisis, advanced-economy wage growth has been generally low relative to past recoveries, especially after accounting for the evolution of labour market conditions over this period. This paper investigates a variety of potential explanations for this weakness, drawing on findings from the literature as well as analysis of recent labour market data in advanced economies.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): International topics, Labour markets JEL Code(s): E, E3, E31, F, F0, J, J3

• Limited Commitment, Endogenous Credibility and the Challenges of Price-level Targeting

  Staff Working Paper 2018-61 Gino Cateau, Malik Shukayev

  This paper studies the cost of limited commitment when a central bank has the discretion to adjust policy whenever the costs of honoring its past commitments become high. Specifically, we consider a central bank that seeks to implement optimal policy in a New Keynesian model by committing to a price-level target path.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Credibility, Inflation targets, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52

• Introducing a Systematic Measure of Idiosyncratic Prices

  Staff Analytical Note 2018-33 Madigan Dockrill, Laurence Savoie-Chabot

  There is a risk that Bank of Canada staff may inadvertently be biased when analyzing inflation: when inflation surprises on the downside, staff might emphasize negative idiosyncratic factors. When inflation surprises on the upside, staff might emphasize the positive idiosyncratic factors.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Inflation and prices, Recent economic and financial developments JEL Code(s): E, E3, E31

• Price Selection

  Staff Working Paper 2018-44 Carlos Carvalho, Oleksiy Kryvtsov

  We propose a simple, model-free way to measure price selection and its impact on inflation. Price selection exists when prices that change in response to aggregate shocks are not representative of the overall population of prices. Due to selection, increases (decreases) in inflation can be amplified because adjusting prices tend to originate from levels far below (above) the average.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Business fluctuations and cycles, Inflation and prices, Transmission of monetary policy JEL Code(s): E, E3, E31, E5, E51

• Sluggish Forecasts

  Staff Working Paper 2018-39 Monica Jain

  Given the influence that agents’ expectations have on key macroeconomic variables, it is surprising that very few papers have tried to extrapolate agents’ “true” expectations directly from the data. This paper presents one such approach, starting with the hypothesis that there is sluggishness in inflation and real GDP growth forecasts.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): E, E3, E31, E37

• On the Evolution of the United Kingdom Price Distributions

  Staff Working Paper 2018-25 Ba M. Chu, Kim Huynh, David T. Jacho-Chávez, Oleksiy Kryvtsov

  We propose a functional principal components method that accounts for stratified random sample weighting and time dependence in the observations to understand the evolution of distributions of monthly micro-level consumer prices for the United Kingdom (UK).

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C1, C14, C8, C83, E, E3, E31, E37

• Bending the Curves: Wages and Inflation

  Staff Analytical Note 2018-15 Dany Brouillette, Madigan Dockrill, Helen Lao, Laurence Savoie-Chabot

  As economic slack continues to be absorbed and the labour market tightens, wage growth and inflation could increase faster than expected, which would suggest convexity in their Phillips curves. This note investigates whether there is convexity in the Phillips curves for Canadian wage growth and inflation by testing different empirical approaches over the post-inflation-targeting period.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Inflation and prices, Labour markets JEL Code(s): E, E2, E24, E3, E31, J, J3

• Non-linéarité de la courbe de Phillips : un survol de la littérature

  Staff Analytical Note 2018-3 Renaud St-Cyr

  The paper reviews evidence from the economic literature on the nature of the relationship between excess capacity and inflation, better known as the Phillips curve. In particular, we examine the linearity of this relationship. This is an important issue in the current economic context in which advanced economies are approaching or exceed their potential output.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Inflation and prices, International topics JEL Code(s): E, E3, E31, E32