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8300 Results

May 13, 1997

Capacity constraints, price adjustment, and monetary policy

The short-run Phillips curve describes a positive short-run relationship between the level of economic activity and inflation. When the level of demand in the economy as a whole runs ahead of the level of output that the economy can supply in the short run, price pressures increase and inflation rises. This article reviews the origins of the short-run Phillips curve with particular emphasis on the long-standing idea that the shape of this curve may be non-linear, with inflation becoming more sensitive to changes in output when the cycle of economic activity is high than when it is low. This type of non-linearity in the short-run Phillips curve, which is typically motivated by the effects of capacity constraints that limit the ability of the economy to expand in the short run, has recently attracted renewed attention. The article surveys recent research that finds some evidence of this type of non-linearity in the Phillips curve in Canada and considers the potential implications for monetary policy.

A Micro Approach to the Issue of Hysteresis in Unemployment: Evidence from the 1988­1990 Labour Market Activity Survey

Staff Working Paper 1997-12 Gordon Wilkinson
This paper uses a rich set of microeconomic labour market data—the 1988­90 Labour Market Activity Survey published by Statistics Canada—to test whether there is negative duration dependence in unemployment spells. It updates and extends similar work carried out by Jones (1995) who used the 1986­87 Labour Market Activity Survey.
Content Type(s): Staff research, Staff working papers Topic(s): Labour markets JEL Code(s): E, E2, E24

The Structure of Interest Rates in Canada: Information Content about Medium-Term Inflation

Staff Working Paper 1997-10 Jim Day, Ron Lange
This paper examines the relationship between the term structure of interest rates and future changes in inflation for Canada using a newly constructed par-value yield series. The main conclusion of the empirical work is that the slope of the nominal term structure from 1- to 5-year maturities is a reasonably good predictor of future changes in inflation over these horizons.

Implementation of Monetary Policy in a Regime with Zero Reserve Requirements

Staff Working Paper 1997-8 Kevin Clinton
Monetary policy can be implemented effectively without reserve requirements as long as cost incentives ensure a predictable demand for settlement balances. A central bank can then achieve the level of short-term interest rates that it desires, using market-oriented instruments only.
Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy implementation JEL Code(s): E, E5, E52
March 21, 1997

Monetary Policy and the Prospects for a Stronger Canadian Economy

Remarks Gordon Thiessen Canadian Association for Business Economics and the Ottawa Economics Association Ottawa, Ontario
Anyone who has read our last Monetary Policy Report, the winter issue of the Bank of Canada Review, or our just-released Annual Report knows that the Bank has been positive about Canada's economic outlook. Basically, we are looking for a solid pickup in the pace of economic expansion in coming months, with inflation remaining low. And, with improvements in the basic foundation of our economy, we see the potential for sustained good economic performance over the medium term.

Monetary Shocks in the G-6 Countries: Is There a Puzzle?

Staff Working Paper 1997-7 Ben Fung, Marcel Kasumovich
This paper attempts to reduce the uncertainty about the dynamics of the monetary transmission mechanism. Central to this attempt is the identification of monetary policy shocks. Recently, VAR approaches that use over-identifying restrictions have shown success in isolating such shocks.
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