00000nam 2200000zi 4500 9.888288 CaOODSP 20221107171940 m o d f cr |n||||||||| 200615t20202020oncd ob f000 0 eng d CaOODSP eng rda CaOODSP eng fre FB3-5/2020-25E-PDF Friedrich, Christian, 1983- author. Monetary policy independence and the strength of the global financial cycle / by Christian Friedrich, Pierre Guérin and Danilo Leiva-Léon. Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2020. ©2020 1 online resource (52 pages) : graphs (mostly colour). text txt rdacontent computer c rdamedia online resource cr rdacarrier Staff working paper = Document de travail du personnel, 1701-9397 ; 2020-25 Cover title. "Last updated: June 5, 2020." Includes bibliographical references (pages 32-37). "We propose a new strength measure of the global financial cycle by estimating a regime-switching factor model on cross-border equity flows for 61 countries. We then assess how the strength of the global financial cycle affects monetary policy independence, which is defined as the response of central banks' policy interest rates to exogenous changes in inflation. We show that central banks tighten their policy rates in response to an unanticipated increase in the inflation gap during times when global financial cycle strength is low. During times of high financial cycle strength, however, the responses of the same central banks to the same unanticipated changes in the inflation gap appear muted. Finally, by assessing the impact of different policy tools on countries' sensitivities to the global financial cycle, we show that using capital controls, macroprudential policies, and the presence of a flexible exchange rate regime can increase monetary policy independence"--Abstract. Includes abstract in French. Monetary policy. Foreign exchange rates. International finance. Politique monétaire. Taux de change. Système monétaire international. Bank of Canada, issuing body. Staff working paper (Bank of Canada) 1701-9397 ; 2020-25. (CaOODSP)9.806221 PDF 1.64 MB https://publications.gc.ca/collections/collection_2020/banque-bank-canada/FB3-5-2020-25-eng.pdf