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For central banks, conducting policy in an environment of uncertainty is a daily fact of life. This uncertainty can take many forms, ranging from incomplete knowledge of the correct economic model and data to future economic and geopolitical events whose precise magnitudes and effects cannot be known with certainty.

In this paper, I consider a simple model in which agents learn about the inflation target of a central bank over time by observing the policy instrument or inflation outcomes. Measuring credibility as the distance between the perceived target and the actual target, an increase in credibility is beneficial to the central bank because it brings the policy consistent with attaining the inflation target closer to that required to attain the output target.

State-space models have long been popular in explaining the evolution of various economic variables. This is mainly because they generally have more economic content than do others in their class of parsimonious models (for example, VARs). Yet, in spite of their advantages, use of these models until recently was limited by the assumption that all […]

Wavelets are mathematical expansions that transform data from the time domain into different layers of frequency levels. Compared to standard Fourier analysis, they have the advantage of being localized both in time and in the frequency domain, and enable the researcher to observe and analyze data at different scales.

This paper examines the effectiveness of international capital controls in India over time by analyzing daily return differentials in the non-deliverable forward (NDF) markets using the self-exciting threshold autoregressive (SETAR) methodology.

In this paper we measure potential output (and consequently the output gap) using state-space models. Given that the estimated output gap is used as an indicator to measure the extent of inflationary pressures in the economy, we evaluate the use of such models for the implementation of monetary policy. Our starting point is the Gerlach […]

Canadian exports have often disappointed since the Great Recession. The apparent disconnect between exports and the Bank of Canada’s current measure of foreign demand has created an impetus to search for an alternative.

Trade liberalizations increase the sales and input purchases of productive firms relative to their less productive domestic competitors. This reallocation affects firms’ market power in their product and input markets. I quantify how the labour market power of employers affects the distribution and size of the gains from trade.