E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
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A Comparison of Twelve Macroeconomic Models of the Canadian Economy
In this report, the authors examine and compare twelve private and public sector models of the Canadian economy with respect to their paradigm, structure, and dynamic properties. These open-economy models can be grouped into two economic paradigms. -
Money in the Bank (of Canada)
With the demise of monetary targeting over the past 20 years in many major countries, the question has arisen as to whether central banks should look at money at all when formulating and conducting monetary policy. -
The Performance and Robustness of Simple Monetary Policy Rules in Models of the Canadian Economy
In this report, we evaluate several simple monetary policy rules in twelve private and public sector models of the Canadian economy. Our results indicate that none of the simple policy rules we examined is robust to model uncertainty, in that no single rule performs well in all models. -
Alternative Public Spending Rules and Output Volatility
One of the central lessons learned from the Great Depression was that adjusting government spending each year to balance the budget increases the volatility of output. -
Labour Markets, Liquidity, and Monetary Policy Regimes
We develop an equilibrium model of the monetary policy transmission mechanism that highlights information frictions in the market for money and search frictions in the market for labour. -
Inflation Expectations and Learning about Monetary Policy
Various measures indicate that inflation expectations evolve sluggishly relative to actual inflation. In addition, they often fail conventional tests of unbiasedness. -
Habit Formation and the Persistence of Monetary Shocks
This paper studies the persistent effects of monetary shocks on output. Previous empirical literature documents this persistence, but standard general-equilibrium models with sticky prices fail to generate output responses beyond the duration of nominal contracts. -
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. -
How to Improve Inflation Targeting at the Bank of Canada
This paper shows that if the Bank of Canada is optimally adjusting its monetary policy instrument in response to inflation indicators to target 2 per cent inflation at a two-year horizon, then deviations of inflation from 2 per cent represent the Bank's forecast errors, and should be uncorrelated with its information set, which includes two-year lagged values of the instrument and the indicators. Positive or negative correlations are evidence of systematic errors in monetary policy.