How important are the benefits of low price-level uncertainty? This paper explores the desirability of price-level path targeting in an estimated DSGE model fit to Canadian data. The policy implications are based on social welfare evaluations.
Welfare Effects of Commodity Price and Exchange Rate Volatilities in a Multi-Sector Small Open Economy ModelThis paper develops a multi-sector New Keynesian model of a small open economy that includes commodity, manufacturing, non-tradable, and import sectors. Price and wage rigidities are sector specific, modelled à la Calvo-Yun style contracts.