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This paper compares price-level-path targeting (PT) with inflation targeting (IT) in a sticky-price, dynamic, general equilibrium model augmented with imperfections in both the debt and equity markets.

In 1995, the broad aggregate M2+ grew at an annual rate of 4.5 per cent—almost twice the rate recorded in 1994—as competition from mutual funds drew less money from personal savings deposits. An adjusted M2+ aggregate, which internalizes the effect of close substitutes such as CSBs and certain mutual funds, grew by only 3.4 per cent. Gross M1 grew by 8.2 per cent during the year, reflecting an increased demand for transactions balances as market interest rates declined and as banks offered more attractive rates of interest on corporate current account balances. The robust growth of gross M1 in the second half of 1995 suggests a moderate expansion of economic activity in the first half of 1996, while moderate growth in the broad aggregates indicates a rate of monetary expansion consistent with continued low inflation. In this annual review of the monetary aggregates, the authors also introduce a new model, based on calculated deviations of M1 from its long-run demand, which suggests that inflation should remain just below the midpoint of the inflation-control target range over the next couple of years.

This paper analyzes the differences in wage ratios of university graduates to less than university graduates, the education premium, in Canada and the United States from 1980 to 2000. Both countries experienced a similar increase in the fraction of university graduates and a similar increase in skill biased technological change based on capital-embodied technological progress, but only the United States had a large increase in the education premium.

Perceived income risks reported in a survey of consumer expectations are more heterogeneous and, on average, lower than indirectly calibrated risks based on panel data. They prove to be one explanation for why a large fraction of households hold very little liquid savings and why accumulated wealth is widely unequal across households.

Over the past 25 years, world long-term interest rates have declined to levels not seen since the 1960s. This decline has been accompanied by falling world investment and savings rates. The authors explore global saving and investment outcomes that have led to the fall in the world real interest rate. The results show that the key factors explaining movements in savings and investment are variables that evolve relatively slowly over time, such as labour force growth and the age structure of the world economy. The conclusions suggest that, over the coming years, it is unlikely that these slowly changing variables will be a source of significant changes in world real interest rates.

Salespeople are widely employed in many industries. We leverage a unique data set on retail sales from a leading Chinese cold-drink manufacturer and information on the firm’s salespeople assignment rule to measure the causal effect of salespeople on product revenue.

We document a new empirical finding in the foreign exchange market: currency returns show systematic reversals around the benchmark fixings. Specifically, the US dollar, on average, appreciates in the hours before fixes and depreciates after fixes.

This survey took place between August 2 and August 23, 2022. Follow-up interviews took place in September. Expectations for inflation one to two years ahead have continued to rise because consumers anticipate supply chain disruptions and elevated oil prices will persist. In contrast, expectations for inflation five years ahead have eased to near pre-pandemic levels. Still, consumers are more divided this quarter about where inflation will end up in the long term.

A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default.

This paper uses Latent Semantic Analysis to extract information from Bank of Canada communication statements and investigates what type of information affects returns and volatility in short-term as well as long-term interest rate markets over the 2002-2008 period.