A Comparison of Alternative Methodologies for Estimating Potential Output and the Output Gap Staff Working Paper 1997-5 Chantal Dupasquier, Alain Guay, Pierre St-Amant In this paper, the authors survey some of the recent techniques proposed in the literature to measure the trend component of output or potential output. Given the reported shortcomings of mechanical filters and univariate approaches to estimate potential output, the paper focusses on three simple multivariate methodologies: the multivariate Beveridge-Nelson methodology (MBN), Cochrane's methodology (CO), and the structural VAR methodology with long-run restrictions applied to output (LRRO). Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C13, C5, C52, E, E5, E52
The Liquidity Trap: Evidence from Japan Staff Working Paper 1997-4 Isabelle Weberpals Japanese economic activity has been stagnant since the collapse of the speculative asset-price bubble in 1990, despite highly expansionary monetary policy which has brought interest rates down to record low levels. Although several reasons have been put forward to explain the sustained weakness of the Japanese economy, none is more intriguing from the viewpoint of a central bank than the possibility that monetary policy had been largely ineffective because the Japanese economy entered a Keynesian "liquidity trap." Content Type(s): Staff research, Staff working papers Topic(s): International topics, Recent economic and financial developments JEL Code(s): E, E4, E42, E5, E51, E52
La courbe de Phillips au Canada : un examen de quelques hypothèses Staff Working Paper 1997-3 Jean-François Fillion, André Léonard This study, which draws on a variety of research on price dynamics in Canada, examines some hypotheses that might explain the poor quality of recent inflation forecasts based on the conventional Phillips curve. Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Inflation targets JEL Code(s): C, C5, C52, E, E3, E31
Fads or Bubbles? Staff Working Paper 1997-2 Huntley Schaller, Simon van Norden This paper tests between fads and bubbles using a new empirical strategy (based on switching-regression econometrics) for distinguishing between competing asset-pricing models. By extending the Blanchard and Watson (1982) model, we show how stochastic bubbles can lead to regime-switching in stock market returns. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): C, C4, C40, G, G1, G12
Reconsidering Cointegration in International Finance: Three Case Studies of Size Distortion in Finite Samples Staff Working Paper 1997-1 Marie-Josée Godbout, Simon van Norden This paper reconsiders several recently published but controversial results about the behaviour of exchange rates. In particular, it explores finite-sample problems in the application of cointegration tests and shows how these may have affected the conclusions of recent research. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C15, C2, C22, C3, C32, F, F3, F31
Do Mechanical Filters Provide a Good Approximation of Business Cycles? Technical Report No. 78 Alain Guay, Pierre St-Amant In this paper, the authors examine how well the Hodrick-Prescott filter (HP) and the band-pass filter recently proposed by Baxter and King (BK) extract the business-cycle component of macroeconomic time series. Content Type(s): Staff research, Technical reports Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C52, E, E3, E32
A Modified P*-Model of Inflation Based on M1 Staff Working Paper 1996-15 Joseph Atta-Mensah This paper examines the performance of M1 in an indicator-model of inflation over time horizons as long as 16 quarters into the future. Content Type(s): Staff research, Staff working papers Topic(s): Economic models JEL Code(s): E, E3, E37
L'endettement du Canada et ses effets sur les taux d'intérêt réels de long terme Staff Working Paper 1996-14 Jean-François Fillion This paper examines the effects that Canada's indebtedness has on Canadian real long-term interest rates, using the vector error-correction model (VECM). Our results show that there is a strongly cointegrated relationship between real interest rates in Canada, U.S. real interest rates, and Canadian public and external debt ratios. Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Interest rates JEL Code(s): E, E4, E43, F, F3, F30, H, H6, H60
The Bank of Canada's New Quarterly Projection Model, Part 4. A Semi-Structural Method to Estimate Potential Output: Combining Economic Theory with a Time-Series Filter Technical Report No. 77 Leo Butler The level of potential output plays a central role in the Bank of Canada's new Quarterly Projection Model (QPM). This report, the fourth in a series documenting QPM, describes a general method to measure potential output, as well as its implementation in the QPM system. Content Type(s): Staff research, Technical reports Topic(s): Economic models JEL Code(s): C, C5, C51, E, E2, E23
Speculative Behaviour, Regime-Switching and Stock Market Crashes Staff Working Paper 1996-13 Simon van Norden, Huntley Schaller This paper uses regime-switching econometrics to study stock market crashes and to explore the ability of two very different economic explanations to account for historical crashes. The first explanation is based on historical accounts of "manias and panics." Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): C, C4, C40, E, E4, E44, G, G1, G12