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We develop a five-region version (Canada, an oil exporter, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices.

We assess the implications of price indexation for estimated frequency of price adjustment in sticky price models of business cycles. These models predominantly assume that non-reoptimized prices are indexed to lagged or average inflation.

This paper develops and estimates a dynamic general equilibrium model that realistically accounts for an input-output linkage between firms operating at different stages of processing. Firms face technological change which is specific to their processing stage and charge new prices according to stage-specific Calvo-probabilities.

The authors provide a detailed technical description of the Terms-of-Trade Economic Model (ToTEM), which replaced the Quarterly Projection Model (QPM) in December 2005 as the Bank's principal projection and policy-analysis model for the Canadian economy.

The authors propose a monetary policy rule for the Terms-of-Trade Economic Model (ToTEM), the Bank of Canada's new projection and policy-analysis model for the Canadian economy.

The author quantitatively studies the interaction between education and occupation choices and its implication for the relationship between the changes in earnings inequality and the changes in wealth inequality in the United States over the 1983–2001 period.

The Terms-of-Trade Economic Model, or ToTEM, replaced the Quarterly Projection Model (QPM) in December 2005 as the Bank's principal projection and policy-analysis model for the Canadian economy. Benefiting from advances in economic modelling and computer power, ToTEM builds on the strengths of QPM, allowing for optimizing behaviour on the part of firms and households, both in and out of steady state, in a multi-product environment. The authors explain the motivation behind the development of ToTEM, provide an overview of the model and its calibration, and present several simulations to illustrate its key properties, concluding with some indications of how the model is expected to evolve going forward.

Staff projections provided for the Bank of Canada's monetary policy decision process take into account the integration of Canada's very open economy within the global economy, as well as its close real and financial linkages with the United States. To provide inputs for this projection, the Bank has developed several models, including MUSE, NEUQ (the New European Quarterly Model), and BoC-GEM (Bank of Canada Global Economy Model), to analyze and forecast economic developments in the rest of the world. The authors focus on MUSE, the model currently used to describe interaction among the principal U.S. economic variables, including gross domestic product, inflation, interest rates, and the exchange rate. Brief descriptions are also provided of NEUQ and BoC-GEM.

The Bank of Canada considers a wide range of information and analysis before making a monetary policy decision and uses carefully articulated models to produce economic projections and to examine alternative scenarios. This article describes an ongoing research agenda at the Bank to develop models in which financial variables play an active role in the transmission of monetary policy actions to economic activity. Such models can help to analyze information from the financial side of the economy and to provide an overall view of the implications of financial developments for the current economic outlook. The authors also explain how this research can help address other issues relevant to the objectives of monetary policy, including how asset-price movements should be taken into account in the monetary policy framework.

The authors study the macroeconomic effects of non-zero trend inflation in a simple dynamic stochastic general-equilibrium model with sticky prices.