Staff working papers

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.

This paper assesses the usefulness of consumer confidence indexes in forecasting aggregate consumer spending in the United States.

This paper describes the positive effect that corporate income tax has on capital formation in the presence of liquidity constraints and uninsurable risk.

This paper summarizes the results of recent research evaluating the Bank of Canada's Quarterly Projection Model (QPM).

Mankiw and Reis (2001a) have proposed a "sticky-information"-based Phillips curve (SIPC) to address some of the concerns with the "sticky-price"-based new Keynesian Phillips curve.

This paper applies the hybrid dynamic general-equilibrium, vector autoregressive (DGE-VAR) model developed by Ireland (1999) to Canadian time series.

Previous studies on whether the nature of the exchange rate regime influences a country's medium-term growth performance have been based on a tripartite classification scheme that distinguishes between pegged, intermediate, and flexible exchange rate regimes.

This paper clarifies the role and the impact of foreign exchange dealers in the relationship between foreign exchange intervention and nominal exchange rates using a unique dataset that disaggregates trades by dealer and by type of trade.

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.

This paper confirms the conjecture that the evaluation of tax policy leads to very different conclusions once the role of entrepreneurs is considered. Contrary to previous literature, the author finds that switching from a progressive to a proportional income tax system has a negligible effect on wealth inequality in the United States.