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2338
result(s)
Employment Effects Of Nominal-Wage Rigidity: An Examination Using Wage-Settlements Data
Staff Working Paper 2000-14
Umar Faruqui
The argument advocating a moderate level of inflation based on the downward nominal-wage rigidity (DNWR) hypothesis rests on three factors: its presence, extent, and negative impact in the labour market. This paper focuses on the employment effect of DNWR.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Labour markets
JEL Code(s):
C,
C2,
C23,
J,
J2,
J23,
J3,
J30
Price Stickiness, Inflation, and Output Dynamics: A Cross-Country Analysis
Staff Working Paper 2000-12
Hashmat Khan
The sticky-price model of aggregate fluctuations implies that countries with high trend inflation rates should exhibit less-persistent output fluctuations than countries with low trend inflation.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles
JEL Code(s):
E,
E3,
E31,
E32
Fractional Cointegration and the Demand for M1
Staff Working Paper 2000-13
Greg Tkacz
Using wavelets, the author estimates the fractional order of integration of a common long-run money-demand relationship whose parameters are obtained from a full-information maximum-likelihood procedure.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Monetary aggregates
JEL Code(s):
C,
C1,
C13,
E,
E4,
E41
Identifying Policy-makers' Objectives: An Application to the Bank of Canada
Staff Working Paper 2000-11
Nicholas Rowe,
James Yetman
In this paper, we develop a new way to test hypotheses about policy-makers' targets, and we implement that test for Canadian monetary policy.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets
JEL Code(s):
E,
E5,
E52,
E6,
E61
May 16, 2000
Recent Developments in the Monetary Aggregates and Their Implications
Narrow Money—Transactions Money The growth rate of the narrow monetary aggregates picked up in 1999, reflecting the expansion in economic activity and the stabilization of interest rates. The sharp acceleration of the narrow aggregates in recent months suggests buoyant growth in GDP in coming quarters. Signs of a possible rise in inflation are also emerging. Over the longer run, for inflation to remain in the Bank's 1 to 3 per cent target range, the growth of narrow money would have to slow down from its current pace. In 1999, the growth rate of M1 also began to converge with that of the other narrow aggregates, M1+ and M1++. This suggests that the influence of the special factors that have been affecting the growth rate of M1 has diminished. Broad Money—"Store of Value" Household savings represent deferred consumption, and therefore the broad monetary aggregate provides information about future spending and, hence, inflation. In 1999, the very broad measure of money, M2++, grew at much the same rate as it did in 1998. This outcome is in line with inflation remaining in the inflation-control target range over the next couple of years.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Recent economic and financial developments
May 15, 2000
Credibility and Monetary Policy
A highly credible monetary policy helps to reduce the degree of uncertainty that can surround the objectives of such policy. When the monetary policy pursued by the central bank is credible, the expectations of the public are focused on a target. If the public believes that the Bank will act to bring inflation back to the target, then its expectations will not react so strongly to fluctuating price trends. In turn, fluctuations in inflation, interest rates, output, and employment should be less pronounced than in the absence of such credibility. The adoption of inflation control as a monetary policy objective by some countries has led central banks to take steps to enhance the credibility of monetary policy. For the Bank of Canada, these include * the publication of our Monetary Policy Report each May and November, with formal updates each February and August * the initiation of communications activities across the country * the use of the overnight interest rate as a short-term operating target * the issuing of a press release each time the Bank changes its key rates To date, most of the studies on this topic have concluded that success in keeping inflation within a target range has helped to increase the credibility of Canadian monetary policy. These surveys suggest that expected inflation, which stood at about 5 per cent in 1990, declined to around 2 per cent by 1999 (Chart 1, page 15). Indeed, according to these surveys, for the entire period during which the Bank has had a target range for inflation, expected inflation rates have remained within that range. Inflation expectations have also reacted very little to changes in the total CPI, suggesting that the targets have helped to focus expectations on the target rate and have thus enhanced the credibility of monetary policy (Chart 2, page 16). One particular study shows that the life of collective wage agreements in Canada has been increasing and that the number of such agreements containing cost-of-living adjustment (COLA) clauses has steadily declined. The authors of this study suggest that this may reflect the greater credibility of Canadian monetary policy (Table 1, page 16). The proportion of mortgages with five-year terms is now higher than it was in the mid-1980s, and many financial institutions have been offering 7- to 10-year mortgages. This also suggests that inflation targets have gained credibility.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Recent economic and financial developments
Probing Potential Output: Monetary Policy, Credibility, and Optimal Learning under Uncertainty
Staff Working Paper 2000-10
James Yetman
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.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Credibility,
Monetary policy and uncertainty,
Potential output
JEL Code(s):
E,
E5,
E52,
E58
Modelling Risk Premiums in Equity and Foreign Exchange Markets
Staff Working Paper 2000-9
René Garcia,
Maral Kichian
The observed predictability of excess returns in equity and foreign exchange markets has largely been attributed to the presence of time-varying risk premiums in these markets. For example, excess equity returns were found to be explained by various financial and economic variables.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Financial markets,
Market structure and pricing
JEL Code(s):
E,
E4,
E44,
F,
F3,
F31,
G,
G1,
G12,
G15
Testing the Pricing-to-Market Hypothesis: Case of the Transportation Equipment Industry
Staff Working Paper 2000-8
Lynda Khalaf,
Maral Kichian
Pricing-to-market (PTM) theory suggests that monopolistic firms which export adjust their destination-specific markups in reaction to exchange rate shocks. These adjustments limit changes in the price of their exports.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Market structure and pricing
JEL Code(s):
C,
C1,
C12,
C15,
L,
L1,
L11,
L16