E44 - Financial Markets and the Macroeconomy

• Real Effects of Price Stability with Endogenous Nominal Indexation

  Staff Working Paper 2009-16 Césaire Meh, Vincenzo Quadrini, Yaz Terajima

  We study a model with repeated moral hazard where financial contracts are not fully indexed to inflation because nominal prices are observed with delay as in Jovanovic & Ueda (1997).

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E2, E21, E3, E31, E4, E44, E5, E52

• Heterogeneous Beliefs and Housing-Market Boom-Bust Cycles in a Small Open Economy

  Staff Working Paper 2009-15 Hajime Tomura

  This paper introduces heterogeneous beliefs among households in a small open economy model for the Canadian economy. The model suggests that simultaneous boom-bust cycles in house prices, output, investment, consumption and hours worked emerge when credit-constrained mortgage borrowers expect that future house prices will rise and this expectation is neither shared by savers nor realized ex-post.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Inflation targets JEL Code(s): E, E4, E44, E5, E52