Staff working papers

• 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.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Interest rates JEL Code(s): C, C2, C22, C4, C49, E, E4, E47

• 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.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Inflation: costs and benefits JEL Code(s): E, E3, E31, E32, E5, E52, E58

• 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

• The Resolution of International Financial Crises: Private Finance and Public Funds

  Staff Working Paper 2001-20 Andy Haldane, Mark Kruger

  Over the past year and a half, the Bank of England and the Bank of Canada have been developing a framework for the resolution of international financial crises that aligns incentives for all parties to deal with a crisis and preserve the integrity of the international financial system. The framework is built on principles, not rules.

  Content Type(s): Staff research, Staff working papers Topic(s): International topics JEL Code(s): F, F3, F34, F4, F42

• Employment Effects of Restructuring in the Public Sector in North America

  Staff Working Paper 2001-19 Paul Fenton, Irene Ip, Geoff Wright

  This paper examines whether restructuring in the public sector contributed to the slower cyclical recovery in Canada than in the United States during the 1990s. Changes in public sector employment are used to investigate this question.

  Content Type(s): Staff research, Staff working papers Topic(s): Labour markets JEL Code(s): J, J4, J45

• Evaluating Factor Models: An Application to Forecasting Inflation in Canada

  Staff Working Paper 2001-18 Marc-André Gosselin, Greg Tkacz

  This paper evaluates the forecasting performance of factor models for Canadian inflation. This type of model was introduced and examined by Stock and Watson (1999a), who have shown that it is quite promising for forecasting U.S. inflation.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C3, C32, E, E3, E37

• Why Do Central Banks Smooth Interest Rates?

  Staff Working Paper 2001-17 Gabriel Srour

  It is commonly observed that central banks respond gradually to economic shocks, moving the interest rate in small discrete steps in the same direction over an extended period of time. This paper examines the empirical evidence regarding central banks' smoothing of interest rates, paying particular attention to the case of Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy implementation JEL Code(s): E, E5

• Implications of Uncertainty about Long-Run Inflation and the Price Level

  Staff Working Paper 2001-16 Gerald Stuber

  This paper surveys recent developments in the theoretical and empirical literature on the economic implications of uncertainty about the longer-term outlook for inflation. In particular, the linkages between inflation, long-run inflation uncertainty, and aggregate economic activity in industrial economies have become considerably better understood during the past decade.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation: costs and benefits JEL Code(s): E, E2, E22, E3, E31, E4, E44