Price-Level Targeting and Inflation Expectations: Experimental Evidence Staff Working Paper 2011-18 Robert Amano, Jim Engle-Warnick, Malik Shukayev In this paper, we use an economics decision-making experiment to test a key assumption underpinning the efficacy of price-level targeting relative to inflation targeting for business cycle stabilization and mitigating the effects of the zero lower bound on nominal interest rates. Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary policy framework JEL Code(s): E, E3, E32, E5, E52
Analyzing Default Risk and Liquidity Demand during a Financial Crisis: The Case of Canada Staff Working Paper 2011-17 Jason Allen, Ali Hortaçsu, Jakub Kastl This paper explores the reliability of using prices of credit default swap contracts (CDS) as indicators of default probabilities during the 2007/2008 financial crisis. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, G, G0, G01, G2, G28
Real-Time Forecasts of the Real Price of Oil Staff Working Paper 2011-16 Christiane Baumeister, Lutz Kilian We construct a monthly real-time data set consisting of vintages for 1991.1-2010.12 that is suitable for generating forecasts of the real price of oil from a variety of models. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43
The Behaviour of Consumer Prices Across Provinces Staff Discussion Paper 2011-2 Gordon Wilkinson Measures of core inflation enable a central bank to distinguish price movements that are transitory and generated by non-monetary events from those that are more permanent and related to prior monetary policy decisions. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Inflation and prices JEL Code(s): E, E3, E31
Financial Factors and Labour Market Fluctuations Staff Working Paper 2011-12 Yahong Zhang What are the effects of financial market imperfections on unemployment and vacancies? Since standard DSGE models do not typically model unemployment, they abstract from this issue. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets, Labour markets JEL Code(s): E, E3, E32, E4, E44, J, J6
Mixed Frequency Forecasts for Chinese GDP Staff Working Paper 2011-11 Philipp Maier We evaluate different approaches for using monthly indicators to predict Chinese GDP for the current and the next quarter (‘nowcasts’ and ‘forecasts’, respectively). We use three types of mixed-frequency models, one based on an economic activity indicator (Liu et al., 2007), one based on averaging over indicator models (Stock and Watson, 2004), and a static factor model (Stock and Watson, 2002). Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C50, C53, E, E3, E37, E4, E47
Sovereign Default Risk Premia, Fiscal Limits and Fiscal Policy Staff Working Paper 2011-10 Huixin Bi We develop a closed economy model to study the interactions among sovereign risk premia, fiscal limits, and fiscal policy. The stochastic fiscal limits, which measure the ability and willingness of the government to service its debt, arise endogenously from a dynamic Laffer curve. Content Type(s): Staff research, Staff working papers Research Topic(s): Fiscal policy, International topics JEL Code(s): E, E6, E62, H, H3, H30, H6, H60
Inventories, Markups and Real Rigidities in Sticky Price Models of the Canadian Economy Staff Working Paper 2011-9 Oleksiy Kryvtsov, Virgiliu Midrigan Recent New Keynesian models of macroeconomy view nominal cost rigidities, rather than nominal price rigidities, as the key feature that accounts for the observed persistence in output and inflation. Kryvtsov and Midrigan (2010a,b) reassess these conclusions by combining a theory based on nominal rigidities and storable goods with direct evidence on inventories for the U.S. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Monetary policy transmission JEL Code(s): E, E3, E31, F, F1, F12
Money and Costly Credit Staff Working Paper 2011-7 Mei Dong I study an economy in which money and credit coexist as means of payment and the settlement of credit requires money. The model extends recent developments in microfounded monetary theory to address the choice of payment methods and the effects of inflation. Whether a buyer uses money or credit depends on the fixed cost of credit and the inflation rate. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Inflation: costs and benefits JEL Code(s): E, E4, E41, E5, E50
Counterfeit Quality and Verification in a Monetary Exchange Staff Working Paper 2011-4 Ben Fung, Enchuan Shao Recent studies on counterfeiting in a monetary search framework show that counterfeiting does not occur in a monetary equilibrium. These findings are inconsistent with the observation that counterfeiting of bank notes has been a serious problem in some countries. Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes JEL Code(s): D, D8, D82, D83, E, E4, E42, E5, E50