Canada’s Wilkins calls for improved macro frameworks

The Bank of Canada is exploring new sources of microdata as it aims to better understand the financial stability impact of monetary policy.

According to Carolyn Wilkins, the central bank’s deputy governor, central banks around the world are still trying to integrate financial stability considerations into monetary policy.

Improving macro-prudential policy frameworks through a better understanding of how the tools operate, is one way to better understand the interlinkages, she said.

“We are exploring new sources of microdata to better understand vulnerabilities and monitor the effectiveness of macro-prudential tools and monetary policy,” she said.

Wilkins also advised central banks to “invest” in policy models that do a better job of “capturing the interlinkages between the financial system and the economy”.

“We are developing policy models that have relevant institutional features and rich heterogeneity in income and wealth to get a better handle on the efficacy and impact of macro-prudential policy tools,” she said.

And while Wilkins admitted she did not think any model will ever be “perfect”, research in this area can limit the amount of uncertainty central banks have to factor in.