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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.

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.

Changes in the financial industry result in new data that are inconsistent with the former presentation, and therefore adjustments are required to "adjust" or smooth out these breaks to establish continuity.

Technological innovations in the financial industry pose major problems for the measurement of monetary aggregates. The authors describe work on a new measure of money that has a more satisfactory means of identifying and removing the effects of financial innovations.

The author explores the role that Taylor-type rules can play in monetary policy, given the degree of uncertainty in the economy. The optimal rule is derived from a simple infinite-horizon model of the monetary transmission mechanism, with only additive uncertainty.

The authors develop an index of financial stress for the Canadian financial system. Stress is defined as the force exerted on economic agents by uncertainty and changing expectations of loss in financial markets and institutions.

The author examines the role of collateral in an environment where lenders and borrowers possess identical information and similar beliefs about its future value. Using option-pricing techniques, he shows that a secured loan contract is equivalent to a regular bond and an embedded option to the borrower to default.

The authors use a dynamic general-equilibrium model to study the role financial frictions play as a transmission mechanism of Canadian monetary policy, and to evaluate the real effects of exogenous credit shocks. Financial frictions, which are modelled as spreads between deposit and loan interest rates, are assumed to depend on economic activity as well as on credit shocks.

In this report, the authors examine and compare twelve private and public sector models of the Canadian economy with respect to their paradigm, structure, and dynamic properties. These open-economy models can be grouped into two economic paradigms.

With the demise of monetary targeting over the past 20 years in many major countries, the question has arisen as to whether central banks should look at money at all when formulating and conducting monetary policy.