E3 - Prices, Business Fluctuations, and Cycles
-
-
New Phillips Curve with Alternative Marginal Cost Measures for Canada, the United States, and the Euro Area
Recent research on the new Phillips curve (NPC) (e.g., Galí, Gertler, and López-Salido 2001a) gives marginal cost an important role in capturing pressures on inflation. In this paper we assess the case for using alternative measures of marginal cost to improve the empirical fit of the NPC. -
On Inflation and the Persistence of Shocks to Output
This paper empirically investigates the possibility that the effects of shocks to output depend on the level of inflation. The analysis extends Elwood's (1998) framework by incorporating in the model an inflation-threshold process that can potentially influence the stochastic properties of output. -
A Consistent Bootstrap Test for Conditional Density Functions with Time-Dependent Data
This paper describes a new test for evaluating conditional density functions that remains valid when the data are time-dependent and that is therefore applicable to forecasting problems. We show that the test statistic is asymptotically distributed standard normal under the null hypothesis, and diverges to infinity when the null hypothesis is false. -
Evaluating Factor Models: An Application to Forecasting Inflation in Canada
This paper evaluates the forecasting performance of factor models for Canadian inflation. This type of model was introduced and examined by Stock and Watson (1999a), who have shown that it is quite promising for forecasting U.S. inflation. -
Implications of Uncertainty about Long-Run Inflation and the Price Level
This paper surveys recent developments in the theoretical and empirical literature on the economic implications of uncertainty about the longer-term outlook for inflation. In particular, the linkages between inflation, long-run inflation uncertainty, and aggregate economic activity in industrial economies have become considerably better understood during the past decade. -
Predetermined Prices and the Persistent Effects of Money on Output
This paper illustrates a model of predetermined pricing, where firms set a fixed schedule of nominal prices at the time of price readjustment, based on the work of Fischer (1977). This type of price-setting specification cannot produce any excess persistence in a fixed-duration model of staggered prices, but we show that with a probabilistic model of price adjustment, as in Calvo (1983), a predetermined pricing specification can produce excess persistence. -
Testing for a Structural Break in the Volatility of Real GDP Growth in Canada
This study tests for a structural break in the volatility of real GDP growth in Canada following the methodology of McConnell and Quiros (1998). A break is found in the first quarter of 1991. -
The Zero Bound on Nominal Interest Rates: How Important Is It?
This paper surveys the literature on the zero bound on the nominal interest rate. It addresses questions ranging from the conditions under which the zero bound on the nominal interest rate might occur to policy options to avoid or use to exit from such a situation. We discuss literature that examines historical and country evidence, and literature that uses models to generate evidence on this question. -
On the Nature and the Stability of the Canadian Phillips Curve
This paper empirically determines why, during the 1990s, inflation in Canada was consistently more stable than predicted by the fixed-coefficients Phillips curve. A time-varying-coefficient model, where all the parameters adjust simultaneously, shows that the behaviour of expectations was probably a major contributing factor.