Monetary policy independence and the strength of the global financial cycle / by Christian Friedrich, Pierre Guérin and Danilo Leiva-Léon.: FB3-5/2020-25E-PDF
"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.
Permanent link to this Catalogue record:
publications.gc.ca/pub?id=9.888288&sl=0
| Department/Agency | Bank of Canada, issuing body. |
|---|---|
| Title | Monetary policy independence and the strength of the global financial cycle / by Christian Friedrich, Pierre Guérin and Danilo Leiva-Léon. |
| Series title | Staff working paper = Document de travail du personnel, 1701-9397 ; 2020-25 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | Cover title. "Last updated: June 5, 2020." Includes bibliographical references (pages 32-37). Includes abstract in French. |
| Publishing information | Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2020. ©2020 |
| Author / Contributor | Friedrich, Christian, 1983- author. |
| Description | 1 online resource (52 pages) : graphs (mostly colour). |
| Catalogue number |
|
| Subject terms | Monetary policy. Foreign exchange rates. International finance. Politique monétaire. Taux de change. Système monétaire international. |
Request alternate formats
To request an alternate format of a publication, complete the Government of Canada Publications email form. Use the form’s “question or comment” field to specify the requested publication.- Date modified: