How to Improve Inflation Targeting at the Bank of Canada Staff Working Paper 2002-23 Nicholas Rowe This paper shows that if the Bank of Canada is optimally adjusting its monetary policy instrument in response to inflation indicators to target 2 per cent inflation at a two-year horizon, then deviations of inflation from 2 per cent represent the Bank's forecast errors, and should be uncorrelated with its information set, which includes two-year lagged values of the instrument and the indicators. Positive or negative correlations are evidence of systematic errors in monetary policy. Content Type(s): Staff research, Staff working papers Topic(s): Inflation targets, Monetary and financial indicators, Monetary policy implementation JEL Code(s): E, E5
The Usefulness of Consumer Confidence Indexes in the United States Staff Working Paper 2002-22 Brigitte Desroches, Marc-André Gosselin This paper assesses the usefulness of consumer confidence indexes in forecasting aggregate consumer spending in the United States. Content Type(s): Staff research, Staff working papers Topic(s): Domestic demand and components, Economic models, International topics JEL Code(s): D, D1, D12, E, E2, E21, E27
Entrepreneurial Risk, Credit Constraints, and the Corporate Income Tax: A Quantitative Exploration Staff Working Paper 2002-21 Césaire Meh This paper describes the positive effect that corporate income tax has on capital formation in the presence of liquidity constraints and uninsurable risk. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Fiscal policy JEL Code(s): D, D3, D31, E, E6, E62, H, H2, H20, H23
Evaluating the Quarterly Projection Model: A Preliminary Investigation Staff Working Paper 2002-20 Robert Amano, Kim McPhail, Hope Pioro, Andrew Rennison This paper summarizes the results of recent research evaluating the Bank of Canada's Quarterly Projection Model (QPM). Content Type(s): Staff research, Staff working papers Topic(s): Economic models JEL Code(s): C, C5, C52, E, E1, E17, E3, E30, E37
Dollarization in Canada: The Buck Stops There Technical Report No. 90 John Murray, James Powell The sharp depreciation of the Canadian dollar and the successful launch of the euro have spawned an animated debate in Canada concerning the potential benefits of formally adopting the U.S. dollar as our national currency. Content Type(s): Staff research, Technical reports Topic(s): Exchange rate regimes JEL Code(s): E, E3, E32, F, F3, F33, F36
Estimates of the Sticky-Information Phillips Curve for the United States, Canada, and the United Kingdom Staff Working Paper 2002-19 Hashmat Khan, Zhenhua Zhu Mankiw and Reis (2001a) have proposed a "sticky-information"-based Phillips curve (SIPC) to address some of the concerns with the "sticky-price"-based new Keynesian Phillips curve. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Inflation and prices JEL Code(s): E, E3, E31
Estimated DGE Models and Forecasting Accuracy: A Preliminary Investigation with Canadian Data Staff Working Paper 2002-18 Kevin Moran, Veronika Dolar This paper applies the hybrid dynamic general-equilibrium, vector autoregressive (DGE-VAR) model developed by Ireland (1999) to Canadian time series. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E3, E32, E37
Corporate Bond Spreads and the Business Cycle Staff Working Paper 2002-15 Zhiwei Zhang This paper examines the predictive power of credit spreads from the corporate bond market. The high-yield bond spread and investment-grade spread can explain 68 per cent and 42 per cent of output variations one year ahead, while the term spread based on government debts can explain only 12 per cent of them. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Monetary and financial indicators, Monetary policy transmission JEL Code(s): E, E3, E5, G, G1
Entrepreneurship, Inequality, and Taxation Staff Working Paper 2002-14 Césaire Meh This paper confirms the conjecture that the evaluation of tax policy leads to very different conclusions once the role of entrepreneurs is considered. Contrary to previous literature, the author finds that switching from a progressive to a proportional income tax system has a negligible effect on wealth inequality in the United States. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Fiscal policy JEL Code(s): D, D3, D31, E, E6, E62, H, H2, H20, H23
La fiabilité des estimations de l'écart de production au Canada Staff Working Paper 2002-10 Jean-Philippe Cayen, Simon van Norden In this paper, we measure, with Canadian data, the scope of the revisions to real-time estimates of the output gap generated with several univariate and multivariate techniques. We also make an empirical evaluation of the usefulness of the output gap estimates for predicting inflation. Content Type(s): Staff research, Staff working papers Topic(s): Potential output JEL Code(s): E, E3, E32