Uninsurable Investment Risks and Capital Income Taxation
This paper studies the capital accumulation and welfare implications of reducing capital income taxation in a general equilibrium economy with uninsurable investment risks.
E - Macroeconomics and Monetary Economics
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Monetary Policy Lag, Zero Lower Bound, and Inflation Targeting
Although the concept of monetary policy lag has historical roots deep in the monetary economics literature, relatively little attention has been paid to the idea. In this paper, we build on Svensson's (1997) inflation targeting framework by explicitly taking into account the lagged effect of monetary policy and characterize the optimal monetary policy reaction function both in the absence and in the presence of the zero lower bound on the nominal interest rate. -
Financial Intermediation, Liquidity and Inflation
This paper develops a search-theoretic model to study the interaction between banking and monetary policy and how this interaction affects the allocation and welfare. Regarding how banking affects the welfare costs of inflation: First, we find that, with banking, inflation generates smaller welfare costs. -
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. -
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. -
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.