E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
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Reactions of Canadian Interest Rates to Macroeconomic Announcements: Implications for Monetary Policy Transparency
In this study we statistically quantify the reactions of Canadian and U.S. interest rates to macroeconomic announcements released in Canada and in the United States. We find that Canadian interest rates react very little to Canadian macroeconomic news and are significantly affected by U.S. macroeconomic news, which indicates that international influences on the Canadian fixed-income markets are important. -
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. -
Inflation and the Tax System in Canada: An Exploratory Partial-Equilibrium Analysis
This paper reports on an exploratory application to Canadian data of an approach pioneered by Martin Feldstein (1997, 1999). Feldstein finds that even at low inflation rates there are costs arising from the distortions introduced by the interaction of inflation with the taxation of income from capital (capital gains, dividends, and interest) in a less-than-perfectly-indexed tax system. -
Identifying Policy-makers' Objectives: An Application to the Bank of Canada
In this paper, we develop a new way to test hypotheses about policy-makers' targets, and we implement that test for Canadian monetary policy. -
Probing Potential Output: Monetary Policy, Credibility, and Optimal Learning under Uncertainty
The effective conduct of monetary policy is complicated by uncertainty about the level of potential output, and thus about the size of the monetary policy response that would be sufficient to achieve the targeted inflation rate. One possible response to such uncertainty is for the monetary authority to "probe," interpreted here as actively using its policy response to learn about the level of potential output. -
Some Explorations, Using Canadian Data, of the S-Variable in Akerlof, Dickens, and Perry (1996)
A number of authors have suggested that economies face a long-run inflation-unemployment trade-off due to downward nominal-wage rigidity. This theory has implications for the nature of the short-run Phillips curve when wage inflation is low. -
Greater Transparency in Monetary Policy: Impact on Financial Markets
Measures have been taken by the Bank of Canada to increase the transparency of Canadian monetary policy. This paper examines whether the greater transparency has improved financial markets' understanding of the conduct of monetary policy. -
Monetary Rules When Economic Behaviour Changes
This paper examines the implications of changes in economic behaviour for simple inflation-forecast–based monetary rules of the type currently used at two inflation-targeting central banks. Three types of changes in economic behaviour are considered, changes that are motivated by developments in monetary and fiscal policy in the 1990s: changes in monetary policy credibility, changes in […] -
The Quantity of Money and Monetary Policy
The relationships among the quantity theory of money, monetarism and policy regimes based on money-growth and inflation targeting are briefly discussed as a prelude to an exposition of alternative views of money's role in the transmission mechanism of monetary policy. The passive-money view treats the money supply as an endogenous variable that plays no role […]