Bank of Canada research delves into monetary policy

bankofcanada

A Bank of Canada working paper examines the interaction between monetary policy and macro-prudential policy and whether policy-makers should respond to financial imbalances.

This paper investigates whether it is optimal for policy-makers to respond to financial imbalances in the context of a model, estimated on Canadian data, that features both financial frictions and financial shocks.

The researchers, Jeannine Bailliu, Césaire Meh and Yahong Zhang, suggest that welfare is higher compared to a

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