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277
result(s)
May 22, 2004
Exchange Rate Pass-Through in Industrialized Countries
Economists' long-standing interest in the degree to which exchange rate movements are reflected in prices was rekindled in the 1970s by a combination of rising inflation and the adoption of more flexible exchange rate regimes in many industrialized countries. Specifically, there were concerns that a large currency depreciation could degenerate into an inflationary spiral. Such fears were curtailed in the 1980s and early 1990s as industrialized countries began to reduce and stabilize their inflation rates. The low-inflation period most industrialized countries entered approximately a decade ago coincided with significant exchange rate depreciations that had much smaller effects on consumer prices than expected. This led to a belief that the extent to which exchange rate movements are passed through to consumer prices has declined. In this article, the authors examine why pass-through could be incomplete and review empirical estimates to determine whether pass-through has indeed declined, suggesting possible reasons for this decline and discussing the implications for monetary policy.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates,
Inflation and prices,
Monetary policy framework
Estimating New Keynesian Phillips Curves Using Exact Methods
Staff Working Paper 2004-11
Lynda Khalaf,
Maral Kichian
The authors use simple new finite-sample methods to test the empirical relevance of the New Keynesian Phillips curve (NKPC) equation.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Inflation and prices
JEL Code(s):
C,
C1,
C13,
C5,
C52,
E,
E3,
E31
A Structural Small Open-Economy Model for Canada
Staff Working Paper 2004-4
Stephen Murchison,
Andrew Rennison,
Zhenhua Zhu
The authors develop a small open-economy dynamic stochastic general-equilibrium (DSGE) model in an attempt to understand the dynamic relationships in Canadian macroeconomic data.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Economic models,
Inflation and prices
JEL Code(s):
E,
E2,
E3,
E5,
E52
December 23, 2003
The Comparative Growth of Goods and Services Prices
For several decades, the prices of services have been rising more rapidly than the prices of goods in Canada and the other major industrialized countries. In 2002, this gap between the growth rates of these two components of the consumer price index (CPI) widened considerably, leading researchers to ask if this was the beginning of a trend. Analysis reveals, however, that the gap is based on short-term dynamics and that it appears to be independent of the trend in the development of the overall price level. Evidence also shows that the gap is eventually reabsorbed. The authors examine a number of potential causes for the prices of services to rise faster than those of goods. These include the more rapid pace of productivity growth in the goods sector, the greater openness of goods to foreign trade, and stronger growth in the demand for services.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation and prices,
International topics,
Productivity
The Canadian Phillips Curve and Regime Shifting
Staff Working Paper 2003-32
Frédérick Demers
Phillips curves are generally estimated under the assumption of linearity and parameter constancy. Linear models of inflation, however, have recently been criticized for their poor forecasting performance.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Inflation and prices
JEL Code(s):
C,
C5,
C52,
E,
E3,
E31
A Simple Test of Simple Rules: Can They Improve How Monetary Policy is Implemented with Inflation Targets?
Staff Working Paper 2003-31
Nicholas Rowe,
David Tulk
The authors evaluate whether an assortment of simple rules could improve how the Bank of Canada implements its inflation-targeting monetary policy. They focus on measuring the correlation between the deviations of inflation from the target and the lagged deviations of rule recommendations from the actual policy interest rate.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation targets,
Monetary policy implementation
JEL Code(s):
E,
E5
Nominal Rigidities and Exchange Rate Pass-Through in a Structural Model of a Small Open Economy
Staff Working Paper 2003-29
Steve Ambler,
Ali Dib,
Nooman Rebei
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.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Economic models,
Exchange rates,
Inflation and prices,
International topics
JEL Code(s):
F,
F2,
F3,
F31,
F33
Explaining and Forecasting Inflation in Emerging Markets: The Case of Mexico
Staff Working Paper 2003-17
Jeannine Bailliu,
Daniel Garcés,
Mark Kruger,
Miguel Messmacher
The authors apply existing inflation models that have worked well in industrialized countries to Mexico, an emerging market that has recently moved to adopt an inflation-targeting framework for monetary policy. They compare the performance of these models with a mark-up model that has been used extensively to analyze inflation in Mexico.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Inflation and prices,
International topics
JEL Code(s):
E,
E3,
E31,
E37
May 22, 2003
Inflation Targeting and Medium-Term Planning: Some Simple Rules of Thumb
Inflation targeting, a stable macroeconomic environment, and an average growth rate for potential output that is not expected to vary much in the next several years all help households, businesses, and governments in their medium-term economic and financial planning. Several simple rules of thumb can be usefully employed in this planning. Specifically, inflation targeting has maintained most major measures of inflation quite close to the target midpoint on average over a number of years. Combined with a clear fiscal framework, this has contributed to a more stable macroeconomic environment in which output varies less around its potential level. Potential output growth is expected to average around 3 per cent over the next several years. In light of these factors and historical relationships, labour income, profits, and consumer spending will likely grow, on average, by about 5 per cent over the medium term. Real and nominal long-term interest rates should also continue to be stable, with real 30-year yields varying around 3.5 or 4.0 per cent, and nominal yields varying around 5.5 or 6.0 per cent.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Business fluctuations and cycles,
Inflation targets,
Inflation: costs and benefits