McCallum Rules, Exchange Rates, and the Term Structure of Interest Rates
McCallum (1994a) proposes a monetary rule where policymakers have some tendency to resist rapid changes in exchange rates to explain the forward premium puzzle.
Staff working papers
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Which Bank is the "Central" Bank? An Application of Markov Theory to the Canadian Large Value Transfer System
We use a method similar to Google's PageRank procedure to rank banks in the Canadian Large Value Transfer System (LVTS). Along the way we obtain estimates of the payment processing speeds for the individual banks. -
Are There Canada-U.S. Differences in SME Financing?
Previous surveys of Canadian and U.S. business owners suggest that access to financing in Canada may be more problematic than in the United States. Using the 2003 Survey of Small Business Financing in the United States and the 2004 Survey on Financing of Small and Medium Enterprises in Canada, this paper examines whether this perception can be better quantified. -
Price Level Targeting in a Small Open Economy with Financial Frictions: Welfare Analysis
How important are the benefits of low price-level uncertainty? This paper explores the desirability of price-level path targeting in an estimated DSGE model fit to Canadian data. The policy implications are based on social welfare evaluations. -
Import Price Dynamics in Major Advanced Economies and Heterogeneity in Exchange Rate Pass-Through
This paper aims at showing heterogeneity in the degree of exchange rate pass-through to import prices in major advanced economies at three different levels: 1) across destination markets; 2) across types of exporters (distinguishing developed economy from emerging economy exporters); and 3) over time. -
A Model of Costly Capital Reallocation and Aggregate Productivity
The author studies the effects of capital reallocation (the flow of productive capital across firms and establishments mainly through changes in ownership) on aggregate labour productivity. Capital reallocation is an important activity in the United States: on average, its total value is 3–4 per cent of U.S. GDP. -
Adopting Price-Level Targeting under Imperfect Credibility: An Update
This paper measures the welfare gains of switching from inflation-targeting to price-level targeting under imperfect credibility. Vestin (2006) shows that when the monetary authority cannot commit to future policy, price-level targeting yields higher welfare than inflation targeting. -
The Role of Bank Capital in the Propagation of Shocks
Recent events in financial markets have underlined the importance of analyzing the link between the financial health of banks and real economic activity. This paper contributes to this analysis by constructing a dynamic general equilibrium model in which the balance sheet of banks affects the propagation of shocks. -
Globalization and Inflation: The Role of China
In this paper, we develop a theoretical model which identifies four channels–import prices, competition with domestic suppliers and workers, and commodity prices–through which price- and wage-setting conditions in country j may affect inflation in country i. -
Combining Canadian Interest-Rate Forecasts
Model risk is a constant danger for financial economists using interest-rate forecasts for the purposes of monetary policy analysis, portfolio allocations, or risk-management decisions. Use of multiple models does not necessarily solve the problem as it greatly increases the work required and still leaves the question "which model forecast should one use?"