E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit

• Inflation Expectations and Learning about Monetary Policy

  Staff Working Paper 2002-30 David Andolfatto, Scott Hendry, Kevin Moran

  Various measures indicate that inflation expectations evolve sluggishly relative to actual inflation. In addition, they often fail conventional tests of unbiasedness.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E4, E47, E5, E52, E58

• Habit Formation and the Persistence of Monetary Shocks

  Staff Working Paper 2002-27 Hafedh Bouakez, Emanuela Cardia, Francisco Ruge-Murcia

  This paper studies the persistent effects of monetary shocks on output. Previous empirical literature documents this persistence, but standard general-equilibrium models with sticky prices fail to generate output responses beyond the duration of nominal contracts.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Monetary policy transmission JEL Code(s): E, E3, E4, E5

• Nominal Rigidities and Monetary Policy in Canada Since 1981

  Staff Working Paper 2002-25 Ali Dib

  This paper develops and estimates a dynamic, stochastic, general-equilibrium model with price and wage stickiness to analyze monetary policy in Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E31, E32, E5, E52

• How to Improve Inflation Targeting at the Bank of Canada

  Staff Working Paper 2002-23 Nicholas Rowe

  This paper shows that if the Bank of Canada is optimally adjusting its monetary policy instrument in response to inflation indicators to target 2 per cent inflation at a two-year horizon, then deviations of inflation from 2 per cent represent the Bank's forecast errors, and should be uncorrelated with its information set, which includes two-year lagged values of the instrument and the indicators. Positive or negative correlations are evidence of systematic errors in monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation targets, Monetary and financial indicators, Monetary policy implementation JEL Code(s): E, E5

• Corporate Bond Spreads and the Business Cycle

  Staff Working Paper 2002-15 Zhiwei Zhang

  This paper examines the predictive power of credit spreads from the corporate bond market. The high-yield bond spread and investment-grade spread can explain 68 per cent and 42 per cent of output variations one year ahead, while the term spread based on government debts can explain only 12 per cent of them.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Monetary and financial indicators, Monetary policy transmission JEL Code(s): E, E3, E5, G, G1

• Currency Fluctuations, Liability Dollarization, and the Choice of Exchange Rate Regimes in Emerging Markets

  Staff Working Paper 2002-6 Patrick Osakwe

  Traditional models of exchange rate regimes ignore the destabilizing effects of sharp and unanticipated exchange rate movements.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes JEL Code(s): E, E5, E52, F, F3, F31, F4, F41

• Taylor Rules in the Quarterly Projection Model

  Staff Working Paper 2002-1 Ben Fung, Dinah Maclean, Jamie Armour

  In recent years, there has been a lot of interest in Taylor-type rules. Evidence in the literature suggests that Taylor-type rules are optimal in a number of models and are fairly robust across different models.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Monetary policy and uncertainty, Monetary policy framework JEL Code(s): E, E5, E52

• The Monetary Transmission Mechanism at the Sectoral Level

  Staff Working Paper 2001-27 Jean Farès, Gabriel Srour

  This paper relies on simple vector autoregressions to investigate the monetary transmission mechanism in broad sectors of the Canadian economy. Two types of disaggregation are considered: one at the level of final expenditures, and one at the level of production.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy transmission JEL Code(s): E, E5, E52

• 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

• 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