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Positive commodity price shocks reduce labor income inequality in commodity-exporting economies by compressing the skill premium, as unskilled-labor-intensive sectors such as construction expand faster than skill-intensive services. A multisector small-open-economy model shows how saving or spending commodity windfalls can reinforce or moderate this decline in inequality.

We add downward nominal wage rigidity to a standard New Keynesian model with sticky prices and wages, where the zero lower bound on nominal interest rates is allowed to bind. We find that wage rigidity not only reduces the frequency of zero bound episodes but also mitigates the severity of corresponding recessions.

John Maynard Keynes said the objective of "analysis is … to provide ourselves with an organized and orderly method of thinking out particular problems .… This is the nature of economic thinking."

In a laboratory experiment, we ask participants to predict inflation using three different policy regimes: inflation targeting—with and without greater communication of the target—average inflation targeting and price level targeting. We use participants’ predictions to compare the level and stability of inflation under each regime.

The financial system, which consists of financial institutions, financial markets, and clearing and settlement systems, lays an important role in a nation’s economy. Sound and efficientfinancial systems can make a significant contribution to economic growth.

This paper studies how financial shocks shape the distribution of output growth by introducing a quantile-augmented vector autoregression (QAVAR), which integrates quantile regressions into a structural VAR framework. The QAVAR preserves standard shock identification while delivering flexible, nonparametric forecasts of conditional moments and tail risk measures for gross domestic product.

Governor Mark Carney discusses why Canada’s exports are lagging and what can be done to respond to the underlying challenges.

The world needs an international institution to promote a new monetary order—a well-functioning, market-based global financial system. This will be the subject of my remarks today.

How do firms change their employment decisions when tax benefits for low-earning workers are expanded? Some firms increase employment overall, whereas others replace high-earning workers with low-earning workers, according to German linked employer-employee data.

In the interbank market, banks will sometimes trade below the central bank's deposit rate. We explain this anomaly using a theory based on market frictions and relationship lending.