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Potential output and the neutral rate in Canada: 2021 update

Author

Listed:
  • Dany Brouillette
  • Guyllaume Faucher
  • Martin Kuncl
  • Austin McWhirter
  • Youngmin Park

Abstract

We expect potential output growth to be higher than in the October 2020 reassessment. By 2024, growth will be slightly above its average growth from 2010 to 2019. We assess that the Canadian nominal neutral rate continues to lie in the range of 1.75 to 2.75 percent.

Suggested Citation

  • Dany Brouillette & Guyllaume Faucher & Martin Kuncl & Austin McWhirter & Youngmin Park, 2021. "Potential output and the neutral rate in Canada: 2021 update," Staff Analytical Notes 2021-6, Bank of Canada.
    • Handle: RePEc:bca:bocsan:21-6
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    References listed on IDEAS

    as
    1. Thomas J. Carter & Xin Scott Chen & José Dorich, 2019. "The Neutral Rate in Canada: 2019 Update," Staff Analytical Notes 2019-11, Bank of Canada.
    2. Thomas Lemieux & Kevin Milligan & Tammy Schirle & Mikal Skuterud, 2020. "Initial Impacts of the COVID-19 Pandemic on the Canadian Labour Market," Canadian Public Policy, University of Toronto Press, vol. 46(S1), pages 55-65, July.
    3. Dmitry Matveev & Julien McDonald-Guimond & Rodrigo Sekkel, 2020. "The neutral rate in Canada: 2020 update," Staff Analytical Notes 2020-24, Bank of Canada.
    4. Martín Fuentes, Natalia & Moder, Isabella, 2021. "The scarring effects of past crises on the global economy," Economic Bulletin Boxes, European Central Bank, vol. 8.
    5. Dany Brouillette & Julien Champagne & Julien McDonald-Guimond, 2020. "Potential output in Canada: 2020 reassessment," Staff Analytical Notes 2020-25, Bank of Canada.
    6. Thomas J. Carter & Xin Scott Chen & Ali Jaffery & Christopher Hajzler & Jonathan Lachaine & Peter Shannon & Subrata Sarker & Graeme Westwood & Beiling Yan, 2021. "Assessing global potential output growth and the US neutral rate: April 2021," Staff Analytical Notes 2021-5, Bank of Canada.
    7. Blit, Joel, 2020. "Automation and reallocation: The lasting legacy of COVID-19 in Canada," CLEF Working Paper Series 31, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    8. Rhys R. Mendes, 2014. "The Neutral Rate of Interest in Canada," Discussion Papers 14-5, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Guyllaume Faucher & Christopher Hajzler & Martin Kuncl & Dmitry Matveev & Youngmin Park & Temel Taskin, 2022. "Potential output and the neutral rate in Canada: 2022 reassessment," Staff Analytical Notes 2022-3, Bank of Canada.
    2. Edouard Djeutem & Mario He & Abeer Reza & Yang Zhang, 2022. "Household Heterogeneity and the Performance of Monetary Policy Frameworks," Staff Working Papers 22-12, Bank of Canada.
    3. Wagner, Joel & Schlanger, Tudor & Zhang, Yang, 2023. "A horse race of alternative monetary policy regimes under bounded rationality," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    4. Thomas J. Carter & Xin Scott Chen & Ali Jaffery & Christopher Hajzler & Jonathan Lachaine & Peter Shannon & Subrata Sarker & Graeme Westwood & Beiling Yan, 2021. "Assessing global potential output growth and the US neutral rate: April 2021," Staff Analytical Notes 2021-5, Bank of Canada.
    5. Christian Friedrich & Peter Selcuk, 2022. "The Impact of Globalization and Digitalization on the Phillips Curve," Staff Working Papers 22-7, Bank of Canada.

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    More about this item

    Keywords

    Economic models; Interest rates; Labour markets; Monetary policy; Potential output; Productivity;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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