E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
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Risk Premium Shocks and the Zero Bound on Nominal Interest Rates
There appears to be a disconnect between the importance of the zero bound on nominal interest rates in the real-world and predictions from quantitative DSGE models. Recent economic events have reinforced the relevance of the zero bound for monetary policy whereas quantitative models suggest that the zero bound does not constrain (optimal) monetary policy. -
Consumption, Housing Collateral, and the Canadian Business Cycle
Using Bayesian methods, we estimate a small open economy model in which consumers face limits to credit determined by the value of their housing stock. The purpose of this paper is to quantify the role of collateralized household debt in the Canadian business cycle. -
Credit Constraints and Consumer Spending
This paper examines the relationship between aggregate consumer spending and credit availability in the United States. The author finds that consumer spending falls (rises) in response to a reduction (increase) in credit availability. -
Resurrecting the Role of Real Money Balance Effects
I present a structural econometric analysis supporting the hypothesis that money is still relevant for shaping inflation and output dynamics in the United States. In particular, I find that real money balance effects are quantitatively important, although smaller than they used to be in the early postwar period. -
A Financial Conditions Index for the United States
The financial crisis of 2007–09 has highlighted the importance of developments in financial conditions for real economic activity. The authors estimate the effect of current and past shocks to financial variables on U.S. GDP growth by constructing two growthbased financial conditions indexes (FCIs) that measure the contribution to quarterly (annualized) GDP growth from financial conditions. -
Simulations du ratio du service de la dette des consommateurs en utilisant des données micro
The author constructs a formal analytic framework to simulate the impact of various economic shocks on the household debt-service ratio, using data from the Canadian Financial Monitor (CFM) survey. -
Adopting Price-Level Targeting under Imperfect Credibility in ToTEM
Using the Bank of Canada's main projection and policy-analysis model, ToTEM, this paper measures the welfare gains of switching from inflation targeting to price-level targeting under imperfect credibility. Following the policy change, private agents assign a probability to the event that the policy-maker will revert to inflation-targeting next period. -
Real Effects of Price Stability with Endogenous Nominal Indexation
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). -
Heterogeneous Beliefs and Housing-Market Boom-Bust Cycles in a Small Open Economy
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.