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"The accessible roadmap to navigating an unpredictable economic earthquake. People are worried about their financial future. The workforce is aging, meaning slower economic growth. Debt is going through the roof, both public and private. Automation and technological revolution are putting people out of work, leading to ever-growing inequality and social breakdown. Add the existential threat of climate change to the list of economic stresses. Then pile on a global pandemic that has cost the global economy trillions. It's not surprising that people are worried. Crises don't unfold because of just one of these factors happening in isolation. Former Governor of the Bank of Canada, Stephen Poloz, calls these factors "tectonic" stresses. As he demonstrates, using examples from previous cycles of boom and bust, major crises occur when several forces converge, like tectonic plates. When the built-up energy is released, the result is an economic crisis. Whether we are barreling towards another financial crisis depends on how the current stresses are handled. Slow growth can be a good thing, as it means low interest rates, and could lead to more home ownership. Our panic about debt, Poloz argues, is a holdover from the financial conditions of the 1930s. Technological change can mean disruption and inequality--but can also lead to greater prosperity for all in the long term, something we can accelerate with good policy. And while responding to climate change will be expensive and difficult, it can also lead to better policies around investment and employment, to say nothing of technological advance. Using examples from the last 150 years of economic history, Stephen Poloz explains ideas sophisticated enough for institutional investors and policymakers in language accessible enough for general readers who are just worried about renewing their mortgages in a climate of fluctuating interest rates. Highly readable and from an acclaimed economist, The Next Age of Uncertainty will be an indispensable guide to the turbulent decades ahead."--

Les risques liés à la stabilité financière sont devenus d'actualité dans la foulée de la crise financière mondiale et de la période prolongée de très bas taux d'intérêt qui a suivi. Le présent article examine l'importance du dosage des politiques monétaire et budgétaire pour la stabilité financière au moyen de simulations contrefactuelles de trois grands épisodes historiques, réalisées à l'aide du principal modèle macroéconomique de la Banque, TOTEM (« Terms-of-Trade Economic Model »). Ces simulations mettent en lumière l'existence d'un lien étroit entre le dosage des politiques monétaire et budgétaire et la dynamique de l'accumulation de la dette des secteurs privé et public. L'objectif n'est pas ici d'élaborer des critères d'optimisation du dosage des politiques, car les simulations montrent clairement que le dosage approprié dépend fortement de la conjoncture. Ce constat fait ressortir la nécessité d'un cadre cohérent pour évaluer les conséquences financières et macroéconomiques relatives de l'accumulation de la dette publique et de la dette privée. En outre, les résultats de l'analyse donnent à penser que la coordination ex ante des politiques monétaire et budgétaire comporte des avantages potentiels, et que le cadre de politiques du Canada – en vertu duquel les autorités monétaire et budgétaire conviennent conjointement d'une cible d'inflation tout en consacrant l'indépendance opérationnelle de la banque centrale – représente un dispositif de coordination élégant.

Financial stability risks have become topical in the wake of the global financial crisis and the subsequent extended period of very low interest rates. This paper investigates the significance of the mix of monetary and fiscal policies for financial stability through counterfactual simulations of three key historical episodes, using the Bank's main policy model, ToTEM (Terms-of-Trade Economic Model). The paper finds that there is an intimate relationship between the monetary/fiscal policy mix and the dynamics of both private sector and public sector debt accumulation. No attempt is made to develop criteria for policy mix optimization, since it is clear from the model simulations that the appropriate policy mix is highly state-dependent. This finding points to the need for a coherent framework for weighing the relative financial and macroeconomic consequences of accumulating public sector versus private sector debt. Furthermore, the analysis suggests that there are potential benefits to ex ante monetary/fiscal policy coordination, and that Canada's policy framework—where the monetary and fiscal authorities jointly agree on an inflation target while enshrining central bank operational independence—represents an elegant coordinating mechanism.

This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making. The sort of post-crisis uncertainty that central banks are dealing with today is more profound than that which is typically subjected to rigorous analysis and does not lend itself easily to formal modelling. As a practical matter, the policy-maker is dependent on macro models to develop a coherent monetary policy plan, and this burden of coherence means that fundamental uncertainty must be incorporated explicitly into the policy formulation process. As suggested here, doing so transforms policy formulation from an exercise in reverse engineering to one of risk management, one consequence of which is to inject a little more realism about uncertainty into the policy narrative, while trusting markets to wrestle with the data flow and deliver two-way trading. The evolution is likely to be a long one - researchers are encouraged to keep focusing on developing a practical understanding of how the economy works, one that admits that rules around economic behaviour are not cast in stone, but are almost certainly subject to variation through time and events. ; Le présent article examine l'évolution que connaissent les banques centrales à la lumière de l'expérience récente et met l'accent sur l'intégration de l'incertitude dans le processus d'élaboration de la politique monétaire. L'incertitude à laquelle les banques centrales sont confrontées dans un contexte d'après-crise est plus profonde que celle faisant généralement l'objet d'analyses rigoureuses et ne se prête pas aussi facilement à la modélisation formelle. Dans la pratique, le décideur dépend des modèles macroéconomiques pour la mise au point d'un plan cohérent en matière de politique monétaire, et en raison de cette exigence de cohérence, l'incertitude fondamentale doit être explicitement prise en compte dans l'élaboration de cette politique. Ce faisant, la formulation de la politique ne ...