Staff working papers

The author re-examines the demand-for-money theory in an intertemporal optimization model. The demand for real money balances is derived to be a function of real income and the rates of return of all financial assets traded in the economy.

Evidence suggests that banks, like firms, face financial frictions when raising funds.

The authors test the statistical significance of Pindyck's (1999) suggested class of econometric equations that model the behaviour of long-run real energy prices.

The authors develop a small open-economy dynamic stochastic general-equilibrium (DSGE) model in an attempt to understand the dynamic relationships in Canadian macroeconomic data.

In this paper, the authors use polynomial adjustment cost (PAC) models to analyze and forecast the main components of the U.S. trade sector.

The author proposes a class of exact tests of the null hypothesis of exchangeable forecast errors and, hence, of the hypothesis of no difference in the unconditional accuracy of two competing forecasts.

A basic neoclassical model of production is often used to assess the contribution of investment to output growth. In the model, investment raises the capital stock and output growth increases in proportion to the growth in capital.

The authors examine evidence of long- and short-run co-movement in Canadian sectoral output data. Their framework builds on a vector-error-correction representation that allows them to test for and compute full-information maximum-likelihood estimates of models with codependent cycle restrictions.

Recent empirical evidence suggests that private consumption is crowded-in by government spending. This outcome violates existing macroeconomic theory, according to which the negative wealth effect brought about by a rise in public expenditure should decrease consumption.

The intertemporal current account approach predicts that the current account of a small open economy is independent of global shocks, and that responses of the current account to country-specific shocks depend on the persistence of the shocks. The author shows that these predictions impose cross-equation restrictions (CERS) on a structural vector autoregression (SVAR).