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Alternative Scenario to the October 2017 MPR Base-Case Projection: Higher Potential Growth

Author

Listed:
  • Jing Yang
  • Ben Tomlin
  • Olivier Gervais

Abstract

We construct an alternative scenario in which trend labour input and business investment are stronger than that expected in the Bank of Canada’s base-case projection in the October 2017 Monetary Policy Report. We find that while the size and timing of these effects are highly uncertain, the level of potential and real output could be almost 1 per cent higher than expected by the end of 2020. The resulting effect on the output gap and inflation is small and therefore does not affect the stance of monetary policy.

Suggested Citation

  • Jing Yang & Ben Tomlin & Olivier Gervais, 2017. "Alternative Scenario to the October 2017 MPR Base-Case Projection: Higher Potential Growth," Staff Analytical Notes 17-18, Bank of Canada.
    • Handle: RePEc:bca:bocsan:17-18
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    References listed on IDEAS

    as
    1. Lise Pichette & Pierre St-Amant & Ben Tomlin & Karine Anoma, 2015. "Measuring Potential Output at the Bank of Canada: The Extended Multivariate Filter and the Integrated Framework," Discussion Papers 15-1, Bank of Canada.
    2. Rhys R. Mendes, 2014. "The Neutral Rate of Interest in Canada," Discussion Papers 14-5, Bank of Canada.
    3. Russell Barnett & Rhys R. Mendes, 2017. "A Structural Interpretation of the Recent Weakness in Business Investment," Staff Analytical Notes 17-7, Bank of Canada.
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    More about this item

    Keywords

    Inflation and prices; Monetary Policy; Potential output;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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