Staff research
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Poignée de main invisible et persistance des cycles économiques : une revue de la littérature
The author explains how self-enforcing labour contracts can enhance the performance of macroeconomic models. He exposes the benefits of using these dynamic contracts to account for some puzzling macroeconomic facts regarding the dynamics and persistence of employment, consumption and output. -
Alternative Targeting Regimes, Transmission Lags, and the Exchange Rate Channel
Using a closed-economy model, Jensen (2002) and Walsh (2003) have, respectively, shown that a policy regime that optimally targets nominal income growth (NIT) or the change in the output gap (SLT) outperforms a regime that targets inflation, because NIT and SLT induce more inertia in the actions of the central bank, effectively replicating the outcome obtained under precommitment. The author obtains a very different result when the analysis is extended to open-economy models. -
Simple Monetary Policy Rules in an Open-Economy, Limited-Participation Model
The authors assess the stabilization properties of simple monetary policy rules within the context of a small open-economy model constructed around the limited-participation assumption and calibrated to salient features of the Canadian economy. By relying on limited participation as the main nominal friction that affects the artificial economy, the authors provide an important check of the robustness of the results obtained using alternative environments in the literature on monetary policy rules, most notably the now-standard "New Keynesian" paradigm that emphasizes rigidities in the price-setting mechanism. -
Financial Constraints and Investment: Assessing the Impact of a World Bank Loan Program on Small and Medium-Sized Enterprises in Sri Lanka
The authors examine the investment behaviour of a sample of small, credit-constrained firms in Sri Lanka. Using a unique panel-data set, they analyze and compare the activities of two groups of small firms distinguished by their different access to financing; one group consists of firms with heavily subsidized loans from the World Bank, and the other consists of firms without such subsidies. -
Excess Collateral in the LVTS: How Much is Too Much?
The authors build a theoretical model that generates demand for collateral by Large Value Transfer System (LVTS) participants under the assumption that they minimize the cost of holding and managing collateral for LVTS purposes. The model predicts that the optimal amount of collateral held by each LVTS participant depends on the opportunity cost of collateral, the transactions costs of acquiring assets used as collateral and transferring them in and out of the LVTS, and the distribution of an LVTS participant's payment flows in the LVTS. -
Real Exchange Rate Persistence in Dynamic General-Equilibrium Sticky-Price Models: An Analytical Characterization
This paper assesses analytically the ability of dynamic general-equilibrium sticky-price models to generate persistent real exchange rate fluctuations. It develops a tractable general-equilibrium model with Calvo-type price stickiness. -
Governance and Financial Fragility: Evidence from a Cross-Section of Countries
The author explores the role of governance mechanisms as a means of reducing financial fragility. First, he develops a simple theoretical general-equilibrium model in which instability arises due to an agency problem resulting from a conflict of interest between the borrower and lender. -
Do Peer Group Members Outperform Individual Borrowers? A Test of Peer Group Lending Using Canadian Micro-Credit Data
Microfinance institutions now serve over 10 million poor households in the developing and developed world, and much of their success has been attributed to their innovative use of peer group lending. There is very little empirical evidence, however, to suggest that group lending schemes offer a superior institutional design over lending programs that serve individual borrowers. -
The Canadian Phillips Curve and Regime Shifting
Phillips curves are generally estimated under the assumption of linearity and parameter constancy. Linear models of inflation, however, have recently been criticized for their poor forecasting performance.