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369
result(s)
Monetary and Fiscal Policies in Canada: Some Interesting Principles for EMU?
Staff Working Paper 2004-28
Virginie Traclet
Choosing a well-designed framework for fiscal and monetary policies is a challenge for economic authorities.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Fiscal policy,
Monetary policy framework
JEL Code(s):
E,
E5,
E58,
E6,
E61,
E63
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
Bank Capital, Agency Costs, and Monetary Policy
Staff Working Paper 2004-6
Césaire Meh,
Kevin Moran
Evidence suggests that banks, like firms, face financial frictions when raising funds.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Financial institutions,
Monetary policy transmission
JEL Code(s):
E,
E4,
E44,
E5,
E52,
G,
G2,
G21
Alternative Targeting Regimes, Transmission Lags, and the Exchange Rate Channel
Staff Working Paper 2003-39
Jean-Paul Lam
Using a closed-economy model, Jensen (2002) and Walsh (2003) have, respectively, shown that a policy regime that optimally targets nominal income growth (NIT) or the change in the output gap (SLT) outperforms a regime that targets inflation, because NIT and SLT induce more inertia in the actions of the central bank, effectively replicating the outcome obtained under precommitment. The author obtains a very different result when the analysis is extended to open-economy models.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Monetary policy framework
JEL Code(s):
E,
E5,
E52,
E58
Simple Monetary Policy Rules in an Open-Economy, Limited-Participation Model
Staff Working Paper 2003-38
Scott Hendry,
Wai-Ming Ho,
Kevin Moran
The authors assess the stabilization properties of simple monetary policy rules within the context of a small open-economy model constructed around the limited-participation assumption and calibrated to salient features of the Canadian economy. By relying on limited participation as the main nominal friction that affects the artificial economy, the authors provide an important check of the robustness of the results obtained using alternative environments in the literature on monetary policy rules, most notably the now-standard "New Keynesian" paradigm that emphasizes rigidities in the price-setting mechanism.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy framework,
Monetary policy transmission
JEL Code(s):
E,
E4,
E44,
E5,
E52,
E58,
F,
F3,
F31
November 23, 2003
An Evaluation of Fixed Announcement Dates
When it launched a new system for regularly announcing its decisions regarding the overnight rate of interest in December 2000, the Bank of Canada had a number of key objectives in mind. These included reduced uncertainty in financial markets, greater focus on the Canadian rather than the U.S. economic environment, more emphasis on the medium-term perspective of monetary policy, and increased transparency regarding the Bank's interest rate decisions. Evidence to date suggests that all four objectives have been met to a substantial degree. Fixed announcement dates have provided regular opportunities for the Bank to communicate its views on the state of the Canadian economy to the public. This has helped to improve understanding of the broad direction of monetary policy and of the rationale behind the Bank's policy decisions although the decisions themselves are not always fully anticipated.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Credibility,
Financial markets,
Interest rates,
Monetary policy and uncertainty,
Monetary policy implementation
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
Monetary Policy in Estimated Models of Small Open and Closed Economies
Staff Working Paper 2003-27
Ali Dib
The author develops and estimates a quantitative dynamic-optimizing model of a small open economy (SOE) with domestic and import price stickiness and capital-adjustment costs. A monetary policy rule allows the central bank to systematically manage the short-term nominal interest rate in response to deviations of inflation, output, and money growth from their steadystate levels.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Exchange rates,
Monetary policy transmission
JEL Code(s):
E,
E3,
E31,
E5,
E52,
F,
F2,
F3
A Small Dynamic Hybrid Model for the Euro Area
Staff Working Paper 2003-19
Ramdane Djoudad,
Céline Gauthier
The authors estimate and solve a small structural model for the euro area over the 1983–2000 period. Given the assumption of rational expectations, the model implies a set of orthogonality conditions that provide the basis for estimating the model's parameter by generalized method of moments.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy transmission
JEL Code(s):
E,
E3,
E31