Nominal Rigidities and Monetary Policy in Canada Since 1981
This paper develops and estimates a dynamic, stochastic, general-equilibrium model with price and wage stickiness to analyze monetary policy in Canada.
E31 - Price Level; Inflation; Deflation
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Estimates of the Sticky-Information Phillips Curve for the United States, Canada, and the United Kingdom
Mankiw and Reis (2001a) have proposed a "sticky-information"-based Phillips curve (SIPC) to address some of the concerns with the "sticky-price"-based new Keynesian Phillips curve. -
An Estimated Canadian DSGE Model with Nominal and Real Rigidities
This paper develops a dynamic, stochastic, general-equilibrium (DGSE) model for the Canadian economy and evaluates the real effects of monetary policy shocks. To generate high and persistent real effects, the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and employment. -
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. -
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. -
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 Commodity-Sensitive Currencies and Inflation Targeting
Two aspects of the recent monetary history of Canada, Australia, and New Zealand stand out: the sensitivity of their dollars to prices of resource-based commodities, and inflation targeting. This paper explores various aspects of these phenomena. -
Core Inflation
The Bank of Canada uses core CPI inflation, the year-over-year rate of change of the consumer price index excluding food, energy, and the effects of changes in indirect taxes, as the operational guide for monetary policy. -
Price Stickiness, Inflation, and Output Dynamics: A Cross-Country Analysis
The sticky-price model of aggregate fluctuations implies that countries with high trend inflation rates should exhibit less-persistent output fluctuations than countries with low trend inflation.