E - Macroeconomics and Monetary Economics

• The Canadian Business Cycle: A Comparison of Models

  Staff Working Paper 2007-38 Frédérick Demers, Ryan Macdonald

  This paper examines the ability of linear and nonlinear models to replicate features of real Canadian GDP. We evaluate the models using various business-cycle metrics.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E37

• Unanticipated Defaults and Losses in Canada's Large-Value Payments System, Revisited

  Staff Discussion Paper 2007-5 Devin Ball, Walter Engert

  Recent work at the Bank of Canada studied the impact of default in Canada’s large-value payments system, and concluded that participants could readily manage their potential losses (McVanel 2005). In an extension of that work, the authors use a much larger set of daily payments data – with three times as many observations – to […]

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial institutions, Payment clearing and settlement systems JEL Code(s): E, E4, E44, E47, G, G2, G21

• Cross-Country Estimates of the Degree of Fiscal Dominance and Central Bank Independence

  Staff Working Paper 2007-36 Carlos De Resende

  This paper studies the interdependence between fiscal and monetary policies, and their joint role in the determination of the price level.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Fiscal policy, Inflation: costs and benefits JEL Code(s): E, E3, E31, E4, E42, E5, E50, E6, E63

• Gold Prices and Inflation

  Staff Working Paper 2007-35 Greg Tkacz

  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.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates, Inflation and prices JEL Code(s): E, E3, E31, E4, E44

• Should Central Banks Adjust Their Target Horizons in Response to House-Price Bubbles?

  Staff Discussion Paper 2007-4 Meenakshi Basant Roi, Rhys R. Mendes

  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 […]

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Central bank research, Credit and credit aggregates, Economic models, Inflation targets, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E4, E42, E44, E5, E52, E58, E6, E61

• Implications of New Accounting Standards for the Bank of Canada's Balance Sheet

  Staff Discussion Paper 2007-2 Mark Zelmer, Grahame Johnson

  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 […]

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial institutions, Monetary policy framework JEL Code(s): E, E5, E58, M, M4

• Oil Price Movements and the Global Economy: A Model-Based Assessment

  Staff Working Paper 2007-34 Selim Elekdag, René Lalonde, Douglas Laxton, Dirk Muir, Paolo Pesenti

  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.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Inflation and prices, International topics JEL Code(s): E, E6, E66, F, F3, F32, F4, F47

• Computing Optimal Policy in a Timeless-Perspective: An Application to a Small-Open Economy

  Staff Working Paper 2007-32 Michel Juillard, Florian Pelgrin

  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.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary policy framework JEL Code(s): C, C6, E, E5, E6

• Micro Foundations of Price-Setting Behaviour: Evidence from Canadian Firms

  Staff Working Paper 2007-31 Daniel de Munnik, Kuan Xu

  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.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Monetary policy transmission JEL Code(s): D, D4, D40, E, E3, E30, L, L1, L11

• Term Structure Transmission of Monetary Policy

  Staff Working Paper 2007-30 Sharon Kozicki, P. A. Tinsley

  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.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Interest rates, Monetary policy transmission JEL Code(s): E, E3, E5, N, N1