August 14, 1999 Passive Money, Active Money, and Monetary Policy Bank of Canada Review - Summer 1999 David Laidler This article by the Bank's visiting economist examines the role of money in the transmission of monetary policy. Professor Laidler argues against the view of money as a passive variable that reacts to changes in prices, output, and interest rates but has no direct causative effect on them. He maintains that the empirical evidence supports the view of money playing an active role in the transmission mechanism. While he agrees that individual monetary aggregates can be difficult to read because of instabilities in the demand-for-money function, he argues that monetary aggregates, particularly those relating to transactions money, should have a more significant place in the hierarchy of policy variables that the Bank considers when formulating monetary policy. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Monetary aggregates, Monetary policy transmission
The Impact of Unemployment Insurance and Unsecured Credit on Business Cycles Staff Working Paper 2023-22 Michael Irwin This paper studies how unsecured consumer credit impacts the extent to which unemployment insurance (UI) policies smooth aggregate consumption fluctuations over the business cycle. Using a general equilibrium real business cycle model, I find that unsecured credit amplifies the extent to which UI smooths cyclical consumption fluctuations. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Fiscal policy, Labour markets JEL Code(s): E, E2, E21, E24, E3, E32, E4, E44, E6, E62
May 22, 2004 Exchange Rate Pass-Through in Industrialized Countries Bank of Canada Review - Spring 2004 Jeannine Bailliu, Hafedh Bouakez Economists' long-standing interest in the degree to which exchange rate movements are reflected in prices was rekindled in the 1970s by a combination of rising inflation and the adoption of more flexible exchange rate regimes in many industrialized countries. Specifically, there were concerns that a large currency depreciation could degenerate into an inflationary spiral. Such fears were curtailed in the 1980s and early 1990s as industrialized countries began to reduce and stabilize their inflation rates. The low-inflation period most industrialized countries entered approximately a decade ago coincided with significant exchange rate depreciations that had much smaller effects on consumer prices than expected. This led to a belief that the extent to which exchange rate movements are passed through to consumer prices has declined. In this article, the authors examine why pass-through could be incomplete and review empirical estimates to determine whether pass-through has indeed declined, suggesting possible reasons for this decline and discussing the implications for monetary policy. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Exchange rates, Inflation and prices, Monetary policy framework
January 25, 2012 Collateral Portfolios and Adverse Dependence Financial System Review - December 2007 Alejandro García, Ramazan Gençay Content Type(s): Publications, Financial System Review articles
Nominal Rigidity, Desired Markup Variations, and Real Exchange Rate Persistence Staff Working Paper 2002-26 Hafedh Bouakez This paper develops and estimates a dynamic general-equilibrium sticky-price model that accounts for real exchange rate persistence. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates, Market structure and pricing, Monetary policy transmission JEL Code(s): F, F3, F31, F4, F41
Consumer Attitudes and the Epidemiology of Inflation Expectations Staff Working Paper 2014-28 Michael Ehrmann, Damjan Pfajfar, Emiliano Santoro This paper studies the formation of consumers’ inflation expectations using micro-level data from the Michigan Survey. It shows that beyond the well-established socio-economic determinants of inflation expectations such as gender, income or education, other characteristics such as the households’ financial situation and their purchasing attitudes also matter. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices JEL Code(s): C, C5, C53, D, D8, D84, E, E3, E31
An Eclectic Approach to Estimating U.S. Potential GDP Staff Working Paper 2002-36 Marc-André Gosselin, René Lalonde The authors describe the principal results obtained from a new method applied to the estimation of potential U.S. GDP. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Potential output JEL Code(s): C, C3, C32, E, E2, E23, E3, E32
Forecasting Inflation with the M1-VECM: Part Two Staff Working Paper 1998-6 Walter Engert, Scott Hendry A central bank's main concern is the general direction of future inflation, and not transitory fluctuations of the inflation rate. As a result, this paper is concerned with forecasting a simple measure of the trend of inflation, the eight-quarter CPI-inflation rate. The primary objective is to improve the M1-based vector-error-correction model (VECM) developed by Hendry […] Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Inflation and prices, Monetary aggregates JEL Code(s): C, C3, C5, E, E3, E4, E5
Central Bank Performance under Inflation Targeting Staff Working Paper 2007-18 Marc-André Gosselin The inflation targeting (IT) regime is 17 years old. With practice of IT now in more than 21 countries, there is enough evidence gathered to take stock of the IT experience. In this paper, we analyze the inflation record of IT central banks. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Inflation targets, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52, E58
Market Valuation and Risk Assessment of Canadian Banks Staff Working Paper 2004-34 Ying Liu, Mingwei Yuan, Eli Papakirykos The authors apply the asset-valuation model developed by Rabinovitch (1989) to six publicly traded Canadian banks over the period 1982–2002. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions JEL Code(s): G, G1, G12, G2, G21