Price Level Targeting: What Is the Right Price? Staff Working Paper 2010-8 Malik Shukayev, Alexander Ueberfeldt Various papers have suggested that Price-Level targeting is a welfare improving policy relative to Inflation targeting. From a practical standpoint, this raises an important yet unanswered question: What is the optimal price index to target? Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E32, E5, E52
The Power of Many: Assessing the Economic Impact of the Global Fiscal Stimulus Staff Discussion Paper 2010-1 Carlos De Resende, René Lalonde, Stephen Snudden The Bank of Canada Global Economy Model (BoC-GEM) is used to examine the effect of various types of discretionary fiscal policies on different regions of the globe. The BoC-GEM is a microfounded dynamic stochastic general-equilibrium global model with six regions, multiple sectors, and international linkages. Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Fiscal policy, International topics, Recent economic and financial developments JEL Code(s): E, E5, E52, E58, E6, E61, E63, F, F4, F42
Estimating DSGE-Model-Consistent Trends for Use in Forecasting Staff Working Paper 2009-35 Jean-Philippe Cayen, Marc-André Gosselin, Sharon Kozicki The workhorse DSGE model used for monetary policy evaluation is designed to capture business cycle fluctuations in an optimization-based format. It is commonplace to log-linearize models and express them with variables in deviation-from-steady-state format. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E5, E52
Optimal Monetary Policy during Endogenous Housing-Market Boom-Bust Cycles Staff Working Paper 2009-32 Hajime Tomura This paper uses a small-open economy model for the Canadian economy to examine the optimal Taylor-type monetary policy rule that stabilizes output and inflation in an environment where endogenous boom-bust cycles in house prices can occur. Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Inflation targets JEL Code(s): E, E4, E44, E5, E52
Exchange Rate Pass-through and Monetary Policy: How Strong is the Link? Staff Working Paper 2009-29 Stephen Murchison Several authors have presented reduced-form evidence suggesting that the degree of exchange rate pass-through to the consumer price index has declined in Canada since the early 1980s and is currently close to zero. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Monetary policy transmission JEL Code(s): E, E5, E52, F, F3, F31, F4, F41
Risk Premium Shocks and the Zero Bound on Nominal Interest Rates Staff Working Paper 2009-27 Robert Amano, Malik Shukayev There appears to be a disconnect between the importance of the zero bound on nominal interest rates in the real-world and predictions from quantitative DSGE models. Recent economic events have reinforced the relevance of the zero bound for monetary policy whereas quantitative models suggest that the zero bound does not constrain (optimal) monetary policy. Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E32, E5, E52
Consumption, Housing Collateral, and the Canadian Business Cycle Staff Working Paper 2009-26 Ian Christensen, Paul Corrigan, Caterina Mendicino, Shin-Ichi Nishiyama Using Bayesian methods, we estimate a small open economy model in which consumers face limits to credit determined by the value of their housing stock. The purpose of this paper is to quantify the role of collateralized household debt in the Canadian business cycle. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Monetary policy transmission JEL Code(s): E, E2, E21, E3, E32, E4, E44, E5, E52, R, R2, R21
Resurrecting the Role of Real Money Balance Effects Staff Working Paper 2009-24 José Dorich I present a structural econometric analysis supporting the hypothesis that money is still relevant for shaping inflation and output dynamics in the United States. In particular, I find that real money balance effects are quantitatively important, although smaller than they used to be in the early postwar period. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Monetary aggregates, Monetary policy transmission JEL Code(s): E, E3, E31, E32, E5, E52
Adopting Price-Level Targeting under Imperfect Credibility in ToTEM Staff Working Paper 2009-17 Gino Cateau, Oleksiy Kryvtsov, Malik Shukayev, Alexander Ueberfeldt Using the Bank of Canada's main projection and policy-analysis model, ToTEM, this paper measures the welfare gains of switching from inflation targeting to price-level targeting under imperfect credibility. Following the policy change, private agents assign a probability to the event that the policy-maker will revert to inflation-targeting next period. Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework, Monetary policy implementation JEL Code(s): E, E3, E31, E5, E52
Real Effects of Price Stability with Endogenous Nominal Indexation Staff Working Paper 2009-16 Césaire Meh, Vincenzo Quadrini, Yaz Terajima We study a model with repeated moral hazard where financial contracts are not fully indexed to inflation because nominal prices are observed with delay as in Jovanovic & Ueda (1997). Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E2, E21, E3, E31, E4, E44, E5, E52