QED Working Paper Number
1367

This paper investigates the effects of unconventional monetary policy in Canada. We use recently proposed methods to construct a shadow interest rate that captures monetary policy at the zero lower bound (ZLB) and estimate a small open economy Bayesian structural vector autoregressive (B-SVAR) model. Controlling for the US macroeconomic and monetary policy variables, we find that Canadian unconventional monetary policy increased Canadian output by 0.23% per month on average between April 2009 and June 2010. Our empirical framework also allows us to quantify the effects of US unconventional monetary policy, which raised US and Canadian output by 1.21% and 1.94% per month, respectively, on average over the 2008--2015 period.

Author(s)
Michal Ksawery Popiel
JEL Codes
Keywords
international monetary policy transmission
small open economy
unconventional monetary policy
Bayesian structural VAR
zero lower bound
Working Paper