This article provides answers to several key questions about Canadian monetary policy. First, what is monetary policy? Second, why does the Bank of Canada focus on the control of inflation rather than other macroeconomic variables? Third, how do the Bank's actions influence the rate of inflation? And, finally, how can monetary policy deliver genuine and significant benefits to society?
Topics: Business fluctuations and cycles; Inflation: costs and benefits; Monetary policy frameworkThe authors show that debt and equity issuance are procyclical for most listed U.S. firms.
Topics: Business fluctuations and cycles; Financial stabilityThe authors provide a detailed technical description of the Terms-of-Trade Economic Model (ToTEM), which replaced the Quarterly Projection Model (QPM) in December 2005 as the Bank's principal projection and policy-analysis model for the Canadian economy.
Topics: Business fluctuations and cycles; Economic modelsThe Terms-of-Trade Economic Model, or ToTEM, replaced the Quarterly Projection Model (QPM) in December 2005 as the Bank's principal projection and policy-analysis model for the Canadian economy. Benefiting from advances in economic modelling and computer power, ToTEM builds on the strengths of QPM, allowing for optimizing behaviour on the part of firms and households, both in and out of steady state, in a multi-product environment. The authors explain the motivation behind the development of ToTEM, provide an overview of the model and its calibration, and present several simulations to illustrate its key properties, concluding with some indications of how the model is expected to evolve going forward.
Topics: Business fluctuations and cycles; Economic modelsThe authors study the macroeconomic effects of non-zero trend inflation in a simple dynamic stochastic general-equilibrium model with sticky prices.
Topics: Business fluctuations and cycles; Economic models; Inflation and prices; Inflation targetsThe authors examine whether simple measures of Canadian equity and housing price misalignments contain leading information about output growth and inflation.
Topics: Business fluctuations and cycles; Inflation and pricesThe empirical relationship between the average growth rate and the volatility of growth rates, both over time and across countries, has important policy implications, which depend critically on the sign of the relationship.
Topics: Business fluctuations and cyclesThe authors develop a projection model of the euro area and the United Kingdom. The model consists of two country blocks, endogenous to each other via the foreign demand channel.
Topics: Business fluctuations and cycles; Economic modelsThe authors estimate a sticky-price dynamic stochastic general-equilibrium model with a financial accelerator, à la Bernanke, Gertler, and Gilchrist (1999), to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks.
Topics: Business fluctuations and cycles; Econometric and statistical methods; Economic modelsThe authors document the out-of-sample forecasting accuracy of the New Keynesian model for Canada.
Topics: Business fluctuations and cycles; Econometric and statistical methods; Economic models
