E - Macroeconomics and Monetary Economics
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Cross-Country Estimates of the Degree of Fiscal Dominance and Central Bank Independence
This paper studies the interdependence between fiscal and monetary policies, and their joint role in the determination of the price level. -
Gold Prices and Inflation
Using data for 14 countries over the 1994 to 2005 period, we assess the leading indicator properties of gold at horizons ranging from 6 to 24 months. -
Should Central Banks Adjust Their Target Horizons in Response to House-Price Bubbles?
The authors investigate the implications of house-price bubbles for the optimal inflation-target horizon using a dynamic general-equilibrium model with credit frictions, house-price bubbles, and small open-economy features. They find that, given the distribution of shocks and inflation persistence over the past 25 years, the optimal target horizon for Canada tends to be at the lower […] -
Implications of New Accounting Standards for the Bank of Canada's Balance Sheet
The Canadian Institute of Chartered Accountants (CICA) has implemented new accounting standards for the valuation and reporting of financial instruments. They are effective for the Bank of Canada in 2007. As a result of these changes, the Bank has begun valuing its holdings of Government of Canada treasury bills on a fair value basis and […] -
Oil Price Movements and the Global Economy: A Model-Based Assessment
We develop a five-region version (Canada, an oil exporter, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices. -
Computing Optimal Policy in a Timeless-Perspective: An Application to a Small-Open Economy
Since the contribution of Kydland and Prescott (1977), it is well known that the optimal Ramsey policy is time inconsistent. In a series of recent contributions, Woodford (2003) proposes a new methodology to circumvent this problem, namely the timeless perspective solution. -
Micro Foundations of Price-Setting Behaviour: Evidence from Canadian Firms
How do firms adjust prices in the marketplace? Do they tend to adjust prices infrequently in response to changes in market conditions? If so, why? These remain key questions in macroeconomics, particularly for central banks that work to keep inflation low and stable. -
Term Structure Transmission of Monetary Policy
Under bond-rate transmission of monetary policy, the authors show that a generalized Taylor Principle applies, in which the average anticipated path of policy responses to inflation is subject to a lower bound of unity. This result helps explain how bond rates may exhibit stable responses to inflation, even in periods of passive policy. -
Modelling Payments Systems: A Review of the Literature
Payments systems play a fundamental role in an economy by providing the mechanisms through which payments arising from transactions can be settled. The existing literature on the economics of payments systems is large but loosely organized, in that each model uses a distinct set-up and sometimes a distinct equilibrium concept.