This paper studies the interdependence between fiscal and monetary policy in a DSGE model with sticky prices and non-zero trend inflation. We characterize the fiscal and monetary policies by a rule whereby a given fraction k of the government debt must be backed by the discounted value of current and future primary surpluses.
Staff working papers
This paper develops and estimates a dynamic general equilibrium model that realistically accounts for an input-output linkage between firms operating at different stages of processing. Firms face technological change which is specific to their processing stage and charge new prices according to stage-specific Calvo-probabilities.
The authors study the macroeconomic effects of non-zero trend inflation in a simple dynamic stochastic general-equilibrium model with sticky prices.
The Welfare Implications of Inflation versus Price-Level Targeting in a Two-Sector, Small Open EconomyThe authors analyze the welfare implications of simple monetary policy rules in the context of an estimated model of a small open economy for Canada with traded and non-traded goods, and with sticky prices and wages.
Several empirical studies suggest that exchange rate pass-through has declined in recent years in industrialized countries.
The author studies the macroeconomic consequences of discretionary changes in the fiscal policy instruments for Canada.
The authors compute welfare-maximizing Taylor rules in a dynamic general-equilibrium model of a small open economy.
Recent empirical evidence suggests that private consumption is crowded-in by government spending. This outcome violates existing macroeconomic theory, according to which the negative wealth effect brought about by a rise in public expenditure should decrease consumption.
The authors analyze exchange rate pass-through in an estimated structural model of a small open economy that incorporates three types of nominal rigidity (wages and the prices of domestically produced and imported goods) and eight different structural shocks. The model is estimated using quarterly data from Canada and the United States.
The authors study the macroeconomic consequences of large military buildups using a New Neoclassical Synthesis (NNS) approach that combines nominal rigidities within imperfectly competitive goods and labour markets. They show that the predictions of the NNS framework generally are consistent with the sign, timing, and magnitude of how hours worked, after-tax real wages, and output actually respond to an upsurge in military purchases.