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Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon.

Consumption volatility relative to output volatility is consistently higher in emerging economies than in developed economies.

The paper examines how the Balassa-Samuelson hypothesis is affected by a modern variation of the standard model that allows product differentiation (within the traded and nontraded goods sectors) with the number of firms determined exogenously or endogenously.

We build an otherwise-standard business cycle model with housework, calibrated consistently with data on time use, in order to discipline consumption-hours complementarity and relate its strength to the size of fiscal multipliers.

We study how different types of monetary policy shape the distributional effects of external economic shocks on households’ consumption in a small open economy. Our results present a trade-off between maintaining overall stabilization and controlling consumption inequality.

In the year just ended, the global economy faced a number of exceptional challenges, reflecting a wide range of economic, financial, and geopolitical risks and uncertainties. These included the fallout from the September 2001 terrorist attacks, corporate accounting scandals, stock market volatility, and developments in the Middle East. Despite this global backdrop, the Canadian economy outperformed virtually all other industrial economies, growing by about 3 1/4 per cent and creating 560,000 jobs, while inflation expectations remained well anchored to the Bank of Canada’s 2 per cent inflation-control target.

This paper studies the effects of financial development, taking into account both formal and informal financing. Using cross-country firm-level data, we document that informal financing is utilized more by rich countries than poor countries.

At the Bank of Canada, we have worked hard over the past several years to define our goals and our methods for achieving them. We have continued to strengthen our monetary policy framework, and we have established priorities in all areas of our operations to help us meet our strategic objectives. In 2002, the Bank set out a medium-term plan for the period 2003–05. The plan’s clearly defined policy frameworks and priorities were critical in guiding our analysis and our decisions in 2003, a year in which Canadians across the country were affected by a number of severe and unanticipated events.

In Canada, temporary workers account for 14 per cent of jobs in the non-farm business sector, are present in a range of industries, and account for 40 per cent of the total job reallocation. Yet most models of job reallocation abstract from temporary workers.

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.