Staff working papers

We study the interaction between epidemics and economic decisions in a model that has silent transmission of the virus. We find that rational behaviour strongly diminishes the severity of the epidemic but worsens the economic recession. We also find that the detection and isolation of not only symptomatic individuals but also those who are infected and asymptomatic or mildly symptomatic can reduce the severity of the recession caused by the pandemic.

How should a central bank conduct quantitative easing (QE) in a monetary union when regions differ in their size and portfolio characteristics? Optimal QE policy suggests allocating greater purchases from the region that faces stronger portfolio frictions, and not necessarily according to each region’s size.

We study the short-run effects of monetary policy using a search-theoretic monetary model in which agents are subject to idiosyncratic shocks and aggregate monetary shocks.

Should unemployment benefits be more generous during economic downturns? The optimal amount and duration of benefit payments ultimately depend on the demographic and wealth characteristics of benefit recipients.

How are your past, current and future earnings related to those of your parents? We explore this by using 37 years of Canadian tax data on two generations.

The goods and services sectors have experienced considerably different dynamics over the past three decades. Our goal in this paper is to understand how such contrasting behaviors at the sectoral level affect the aggregate level of trend inflation dynamics.

We examine the macro implications of commodity price shocks in a model with multiple production sectors that are interconnected within a commodity-exporting small open economy.

Should managers be paid in stock options if they provide stock-market participants with information about the firm? This paper studies how firm owners trade off the benefit of stock-price incentives and better-informed market participants against the cost of potential stock-price manipulation.

Banks’ business interactions create a network of relationships that are hidden in the correlations of bank stock returns. But for policy interventions, we need causality to understand how the network changes. Thus, this paper looks for the causal network anticipated by investors.

Raising liquidity when funding is stressed creates pressure on the financial market. Liquidating large quantities of assets depresses their prices and may amplify funding shocks. How do banks weathering a funding crisis contribute to contagion risk?