Author
Listed:
- Thorsten V. Koeppl
- Jeremy M. Kronick
- James McNeil
Abstract
We develop a new series of Canadian monetary policy shocks for the time period 1986 to 2023. Our shocks are constructed as the daily change in the Nelson–Siegel yield curve factors on days of monetary policy events such as announcements of the short‐run policy rate and speeches by Bank of Canada officials. This allows us to look at both conventional and unconventional monetary policy. We find that tighter monetary policy lowers inflation and GDP. Monetary policy shocks, however, often twist the yield curve, potentially offsetting changes in the short‐run policy rate. Finally, speeches also tend to move the yield curve with similar effects on inflation and GDP as formal policy announcements. L'utilisation des chocs fonctionnels pour évaluer la politique monétaire conventionnelle et non conventionnelle au Canada. Nous mettons au point une nouvelle série de chocs pour la politique monétaire canadienne pour la période allant de 1986 à 2023. Nos chocs sont élaborés selon la variation quotidienne des facteurs de la courbe des taux du modèle Nelson‐Siegel les jours d'événements concernant la politique monétaire, comme les annonces du taux directeur à court terme et les discours des représentants de la Banque du Canada. Cela nous permet d'étudier à la fois la politique monétaire conventionnelle et non conventionnelle. Nous constatons qu'une politique monétaire plus stricte diminue l'inflation et le PIB. Cependant, les chocs de la politique monétaire déforment souvent la courbe des taux, ce qui pourrait compenser les variations du taux directeur à court terme. Enfin, les discours, en tant qu'annonces officielles de la politique, ont également tendance à déplacer la courbe des taux, produisant un effet semblable sur l'inflation et le PIB.
Suggested Citation
Thorsten V. Koeppl & Jeremy M. Kronick & James McNeil, 2024.
"Using functional shocks to assess conventional and unconventional monetary policy in Canada,"
Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(4), pages 1314-1336, November.
Handle:
RePEc:wly:canjec:v:57:y:2024:i:4:p:1314-1336
DOI: 10.1111/caje.12741
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