E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
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From Monetary Policy Instruments to Administered Interest Rates: The Transmission Mechanism in Canada
The authors investigate interest-rate aspects of the transmission mechanism of monetary policy instruments in Canada, focussing on the stability of the relationships between some key interest rates and the instruments of monetary policy. To determine what shifts may have occurred in recent years, they describe movements in rate differentials, apply cointegration tests and estimate error-correction […] -
Monetary Policy, Uncertainty and the Presumption of Linearity
This report shows that extreme conditions and volatility in markets are much more likely to result from systematic policy errors in gauging and responding to inflationary pressures in an economy than from unfortunate random shocks. We describe a simple model that incorporates the key features of the policy control process. We use two versions of […] -
Some Implications of International Financial Integration for Canadian Public Policy
The domestic capital markets of the major industrial countries have become more closely integrated over the last two decades, a by-product of regulatory and technological change. This paper considers some of the implications of those changes for Canadian public policy. While no profound implications are found for Canadian macroeconomic policies, which probably reflects a long […] -
The Goal of Price Stability: A Review of the Issues
The basic responsibility of a central bank is to preserve the value of money—that is, to maintain stability in the general level of prices. This report pulls together the main arguments for and against price stability as the appropriate goal for monetary policy. The available evidence suggests that the benefits of price stability are many […] -
International Interest Rate Linkages and Monetary Policy: A Canadian Perspective
This paper examines the implications of increased international capital mobility and asset substitutability for domestic monetary policy in a small open economy such as Canada. Alternative definitions of international financial market integration are presented and tested in the context of two popular macro models. In the main, results suggest that interest rate relationships in Canada […] -
An Analysis of the Information Content of Alternative Credit Aggregates
This study evaluates the information content of 25 measures of credit with respect to three macroeconomic variables—nominal spending, real spending and prices. Initially, simple descriptive techniques are used to assess the contemporaneous and leading relationships between the credit aggregates and the three goal variables. Next, bivariate vector autoregression models are constructed by regressing each of […] -
An Analysis of the Information Content of Alternative Monetary Aggregates
In this study the authors compare the information content of alternative monetary aggregates with respect to total spending in the economy, using data for Canada. The analysis considers 46 monetary measures, about half of which constitute conventional summation aggregates, while the remainder are superlative indices of monetary services based on the Fisher Ideal formula. The […] -
A Comparison of Alternative Monetary Policy Regimes in a Small Dynamic Open-Economy Simulation Model
In this paper, the simulation properties of a small, dynamic, open-economy IS-LM-Aggregate Supply model are examined under a variety of alternative policy rule assumptions. These assumptions include rigid money stock, exchange rate and nominal income targets, as well as less rigid policy rules that recognize information limitations. The model that is used consists of four […]
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