Business fluctuations and cycles
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The Role of Credit in International Business Cycles
This paper examines the role of bank credit in modeling and forecasting business cycle fluctuations, and investigates the international transmission of US credit shocks, using a global vector autoregressive (GVAR) framework and associated country-specific error correction models. -
Financial Conditions and the Money-Output Relationship in Canada
We propose a drifting-coefficient model to empirically study the effect of money on output growth in Canada and to examine the role of prevailing financial conditions for that relationship. We show that such a time-varying approach can be a useful way of modelling the impact of money on growth, and can partly reconcile the lack of concensus in the literature on the question of whether money affects growth. -
China’s Emergence in the World Economy and Business Cycles in Latin America
The international business cycle is very important for Latin America’s economic performance as the recent global crisis vividly illustrated. This paper investigates how changes in trade linkages between China, Latin America, and the rest of the world have altered the transmission mechanism of international business cycles to Latin America. -
International Business Cycles and Financial Frictions
This paper builds a two-country DSGE model to study the quantitative impact of financial frictions on business cycle co-movements when investors have foreign asset exposure. The investor in each country holds capital in both countries and faces a leverage constraint on her debt. -
Fooled by Search: Housing Prices, Turnover and Bubbles
his paper develops and estimates a model to explain the behaviour of house prices in the United States. The main finding is that over 70% of the increase in house prices relative to trend during the increase of house prices in the United States from 1995 to 2006 can be explained by a pricing mechanism where market participants are ‘Fooled by Search.’ -
November 17, 2011
Extracting Information from the Business Outlook Survey: A Principal-Component Approach
This article reviews recent work that uses principal-component analysis to extract information common to indicators from the Bank of Canada’s Business Outlook Survey (BOS). The authors use correlation analysis and an out-of-sample forecasting exercise to assess and compare the information content of the principal component with that of responses to key individual survey questions on growth in real gross domestic product and in real business investment. Results suggest that summarizing the common movements among BOS indicators may provide useful information for forecasting near-term growth in business investment. For growth in real gross domestic product, however, the survey’s balance of opinion on future sales growth appears to be more informative. -
Inventories, Markups and Real Rigidities in Sticky Price Models of the Canadian Economy
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. -
The Impact of the Global Business Cycle on Small Open Economies: A FAVAR Approach for Canada
Building on the growing evidence on the importance of large data sets for empirical macroeconomic modeling, we use a factor-augmented VAR (FAVAR) model with more than 260 series for 20 OECD countries to analyze how global developments affect the Canadian economy. -
Financial Spillovers Across Countries: The Case of Canada and the United States
The authors investigate financial spillovers across countries with an emphasis on the effect of shocks to financial conditions in the United States on financial conditions and economic activity in Canada. These questions are addressed within a global vector autoregression model.