Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241169 
Year of Publication: 
2020
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2020-3
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We propose a novel framework to analyze how policy-makers can manage risks to the median projection and risks specific to the tail of gross domestic product (GDP) growth. By combining a quantile regression of GDP growth with a vector autoregression, we show that monetary and macroprudential policy shocks can reduce credit growth and thus GDP tail risk. So policymakers concerned about GDP tail risk would choose a tighter policy stance at the expense of macroeconomic stability. Using Canadian data, we show how our framework can add tail event information to projection models that ignore them and give policy-makers a tool to communicate the trade-offs they face.
Subjects: 
Central bank research
Economic models
Financial stability
Financial system regulationand policies
Interest rates
Monetary policy
Monetary policy framework
JEL: 
E44
E52
E58
D8
G01
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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