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The goal of Canadian monetary policy is to contribute to solid economic performance and rising living standards. The best way we can do this is by keeping inflation low, stable, and predictable. This has important implications for labour market performance.

The author develops a theoretical model of bank closure. The regulatory decision about bank failure consists of two parts: whether to close and how to close.

The author documents the use by Canadian banks of subordinated debt (SD) as a capital instrument.

The paper explores the link between financial distress and the commodity price hedging behaviour of Canadian oil firms.

This paper attempts to identify the trend unemployment rate, an empirical concept, using cointegration theory. The authors examine whether there is a cointegrating relationship between the observed unemployment rate and various structural factors, focussing neither on the non-accelerating-inflation rate of unemployment (NAIRU) nor on the natural rate of unemployment, but rather on the trend unemployment rate, which they define in terms of cointegration.

The degree to which financial constraint is binding is often not directly observable in commonly used business data sets (e.g., Compustat). In this paper, we measure and estimate the likelihood of a firm being constrained by external financing using a data set of small- and medium-sized Canadian firms.

This paper considers a dynamic stochastic general equilibrium model for a small open economy and finds that an improvement in the terms of trade causes a housing boom-bust cycle if the duration of the improvement is uncertain.

This paper identifies aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 3% of the variation in U.S. public firms’ aggregate investment.

This paper compares two types of monetary policy: price-level targeting and inflation targeting. It reviews recent arguments that favour price-level targeting, and examines how certain factors, such as the nature of the shocks affecting the economy and the degree to which agents are forward-looking, bear upon the arguments.

We add downward nominal wage rigidity to a standard New Keynesian model with sticky prices and wages, where the zero lower bound on nominal interest rates is allowed to bind. We find that wage rigidity not only reduces the frequency of zero bound episodes but also mitigates the severity of corresponding recessions.