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Feedback rules are rules aimed at guiding policy-makers as they face the problem of keeping inflation close to a desired path without causing variability elsewhere in the economy. These rules link short-term interest rates, controlled by the central bank, to the rate of inflation and/or its deviation from a target rate. The authors describe the most popular types of feedback rules and review some simulation results.

Walsh's paper highlights many useful lessons that can be learned from the conventional framework and its various extensions. However, the financial crisis provides a stark and costly reminder of just how incomplete the standard model is.

We are experiencing a commodity super cycle. Throughout the current boom, the scale of price increases has been higher, and the range of affected commodities broader, than in previous upturns. Since 2002, grain and oilseed prices have more than doubled, base metals prices have tripled, and oil prices have quadrupled.

The authors develop a projection model of the euro area and the United Kingdom. The model consists of two country blocks, endogenous to each other via the foreign demand channel.

In an era when the primary policy instrument is the level of the short-term interest rate, a comparison of that rate with some equilibrium rate can be a useful guide for policy and a convenient method to measure the stance of monetary policy.

In its role as fiscal agent to the government, the Bank of Canada provides analysis and advice on decisions about the government's domestic debt portfolio. Debt-management decisions depend on assumptions about future interest rates, macroeconomic outcomes, and fiscal policy, yet when a debt-strategy decision is taken, none of these factors can be known with certainty. Moreover, the government has various financing options (i.e., treasury bills, nominal bonds, and inflation-linked bonds) to meet its objectives of minimizing debt-service charges while simultaneously ensuring a prudent risk profile and well-functioning government securities markets. Bank of Canada staff have therefore developed a mathematical model to assist in the decision-making process. This article describes the key aspects of the debt manager's challenge and the principal assumptions incorporated in the debt-strategy model, illustrated with specific results.

This paper evaluates the international spillover effects of large-scale asset purchases (LSAPs) using a two-country dynamic stochastic general-equilibrium model with nominal and real rigidities, and portfolio balance effects.

Technological innovations in the financial industry pose major problems for the measurement of monetary aggregates. The authors describe work on a new measure of money that has a more satisfactory means of identifying and removing the effects of financial innovations.

Inflation forecasting is fundamental to monetary policy. In practice, however, economists are faced with competing goals: accuracy and theoretical consistency.

To better understand price-setting behaviour in the Canadian economy, the Bank of Canada's regional offices surveyed a representative sample of 170 firms between July 2002 and March 2003. The authors discuss the reasons behind the survey, the methodology used to develop the questionnaire and conduct the interviews, and summarize the results. The study also assessed several explanations for holding prices steady despite market pressures for a change. The survey findings indicate that prices in Canada are relatively flexible and have become more flexible over the past decade. Price stickiness was generally found to originate in firms' fears of antagonizing customers or disturbing the goodwill or reputation developed with them. A detailed discussion of the results includes a consideration of their implications for monetary policy.