E50 - General
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Money and Costly Credit
I study an economy in which money and credit coexist as means of payment and the settlement of credit requires money. The model extends recent developments in microfounded monetary theory to address the choice of payment methods and the effects of inflation. Whether a buyer uses money or credit depends on the fixed cost of credit and the inflation rate. -
Counterfeit Quality and Verification in a Monetary Exchange
Recent studies on counterfeiting in a monetary search framework show that counterfeiting does not occur in a monetary equilibrium. These findings are inconsistent with the observation that counterfeiting of bank notes has been a serious problem in some countries. -
Central Bank Haircut Policy
We present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show that a lending facility provides a bundle of two types of insurance: insurance against liquidity risk as well as insurance against downside risk of the collateral. -
Financial Stress, Monetary Policy, and Economic Activity
This paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold. -
Emerging Asia's Impact on Food and Oil Prices: A Model-Based Analysis
The authors explore the usefulness of macroeconomic models in analyzing global economic developments by examining movements in commodity prices between July 2007 and July 2008. They use the Bank of Canada's version of the Global Economy Model and investigate the longer-term outlook for commodity prices by constructing two different, globally consistent, scenarios for emerging Asia. -
Financial Intermediation, Liquidity and Inflation
This paper develops a search-theoretic model to study the interaction between banking and monetary policy and how this interaction affects the allocation and welfare. Regarding how banking affects the welfare costs of inflation: First, we find that, with banking, inflation generates smaller welfare costs. -
Which Bank is the "Central" Bank? An Application of Markov Theory to the Canadian Large Value Transfer System
We use a method similar to Google's PageRank procedure to rank banks in the Canadian Large Value Transfer System (LVTS). Along the way we obtain estimates of the payment processing speeds for the individual banks. -
The Welfare Implications of Fiscal Dominance
This paper studies the interdependence between fiscal and monetary policy in a DSGE model with sticky prices and non-zero trend inflation. We characterize the fiscal and monetary policies by a rule whereby a given fraction k of the government debt must be backed by the discounted value of current and future primary surpluses. -
Price-Level versus Inflation Targeting with Financial Market Imperfections
This paper compares price-level-path targeting (PT) with inflation targeting (IT) in a sticky-price, dynamic, general equilibrium model augmented with imperfections in both the debt and equity markets.