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8755 Results

An Estimated Canadian DSGE Model with Nominal and Real Rigidities

Staff Working Paper 2001-26 Ali Dib
This paper develops a dynamic, stochastic, general-equilibrium (DGSE) model for the Canadian economy and evaluates the real effects of monetary policy shocks. To generate high and persistent real effects, the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and employment.
Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E31, E32

New Phillips Curve with Alternative Marginal Cost Measures for Canada, the United States, and the Euro Area

Staff Working Paper 2001-25 Edith Gagnon, Hashmat Khan
Recent research on the new Phillips curve (NPC) (e.g., Galí, Gertler, and López-Salido 2001a) gives marginal cost an important role in capturing pressures on inflation. In this paper we assess the case for using alternative measures of marginal cost to improve the empirical fit of the NPC.
Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Inflation and prices JEL Code(s): E, E3, E31

Price-Level versus Inflation Targeting in a Small Open Economy

Staff Working Paper 2001-24 Gabriel Srour
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.
Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E5, E52

Modelling Mortgage Rate Changes with a Smooth Transition Error-Correction Model

Staff Working Paper 2001-23 Ying Liu
This paper uses a smooth transition error-correction model (STECM) to model the one-year and five-year mortgage rate changes. The model allows for a non-linear adjustment process of mortgage rates towards their long-run equilibrium.

On Inflation and the Persistence of Shocks to Output

Staff Working Paper 2001-22 Maral Kichian, Richard Luger
This paper empirically investigates the possibility that the effects of shocks to output depend on the level of inflation. The analysis extends Elwood's (1998) framework by incorporating in the model an inflation-threshold process that can potentially influence the stochastic properties of output.

A Consistent Bootstrap Test for Conditional Density Functions with Time-Dependent Data

Staff Working Paper 2001-21 Fuchun Li, Greg Tkacz
This paper describes a new test for evaluating conditional density functions that remains valid when the data are time-dependent and that is therefore applicable to forecasting problems. We show that the test statistic is asymptotically distributed standard normal under the null hypothesis, and diverges to infinity when the null hypothesis is false.
Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C12, C15, E, E3, E37
November 18, 2001

A New Measure of Core Inflation

While the Bank of Canada's inflation-control target is specified in terms of the rate of increase in the total consumer price index, the Bank uses a measure of trend or "core" inflation as a short-term guide for its monetary policy actions. When the inflation targets were renewed in May 2001, the Bank announced that it was adopting a new measure of core inflation. This measure excludes the eight most volatile components of the CPI and adjusts the remaining components for the effect of changes in indirect taxes. In this article, the author discusses the definition of the new measure of core inflation and describes some of its advantages relative to the previous measure. He notes that the new measure has a firmer statistical basis, has a better correspondence with economic theory, and does a better job of predicting future changes in overall inflation. While the new measure has these advantages, the Bank will continue to monitor a broad range of indicators when assessing the likely future path for inflation.
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