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Do demographics affect monetary policy transmission in Canada?

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  • Jeremy Kronick
  • Steve Ambler

Abstract

Using a panel of macroeconomic data for Canada and its 10 provinces, we estimate the dynamic effects of monetary policy shocks from the mid‐1980s until the present. We then relate the change in the impact of these shocks to macroeconomic factors including demographics, specifically changes in the old age dependency ratio. We find that the inflation‐targeting regime has had an ambiguous effect on the impact of monetary policy shocks in Canada. On the other hand, changing demographics have unambiguously reduced the impact of monetary policy shocks. This can help to explain tepid inflation since the financial crisis and could eventually undermine the effectiveness of Canada's inflation targeting regime.

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  • Jeremy Kronick & Steve Ambler, 2019. "Do demographics affect monetary policy transmission in Canada?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(2), pages 787-811, April.
    • Handle: RePEc:wly:ijfiec:v:24:y:2019:i:2:p:787-811
    DOI: 10.1002/ijfe.1691
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    References listed on IDEAS

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    Cited by:

    1. Olivier Fortin‐Gagnon & Maxime Leroux & Dalibor Stevanovic & Stéphane Surprenant, 2022. "A large Canadian database for macroeconomic analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(4), pages 1799-1833, November.
    2. Kronick, Jeremy M. & Villarreal, Francisco G., 2019. "Distributional impacts of low for long interest rates," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 44666, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Giacomo Mangiante, 2022. "Demographic Trends and the Transmission of Monetary Policy," Cahiers de Recherches Economiques du Département d'économie 22.04, Université de Lausanne, Faculté des HEC, Département d’économie.
    4. Joseph Kopecky, 2021. "Okay Boomer... Excess Money Growth, Inflation, and Population Aging," Trinity Economics Papers tep0721, Trinity College Dublin, Department of Economics, revised Oct 2021.

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