Monetary Policy in Estimated Models of Small Open and Closed Economies Staff Working Paper 2003-27 Ali Dib The author develops and estimates a quantitative dynamic-optimizing model of a small open economy (SOE) with domestic and import price stickiness and capital-adjustment costs. A monetary policy rule allows the central bank to systematically manage the short-term nominal interest rate in response to deviations of inflation, output, and money growth from their steadystate levels. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Exchange rates, Monetary policy transmission JEL Code(s): E, E3, E31, E5, E52, F, F2, F3
May 22, 2003 Inflation Targeting and Medium-Term Planning: Some Simple Rules of Thumb Bank of Canada Review - Spring 2003 David Longworth Inflation targeting, a stable macroeconomic environment, and an average growth rate for potential output that is not expected to vary much in the next several years all help households, businesses, and governments in their medium-term economic and financial planning. Several simple rules of thumb can be usefully employed in this planning. Specifically, inflation targeting has maintained most major measures of inflation quite close to the target midpoint on average over a number of years. Combined with a clear fiscal framework, this has contributed to a more stable macroeconomic environment in which output varies less around its potential level. Potential output growth is expected to average around 3 per cent over the next several years. In light of these factors and historical relationships, labour income, profits, and consumer spending will likely grow, on average, by about 5 per cent over the medium term. Real and nominal long-term interest rates should also continue to be stable, with real 30-year yields varying around 3.5 or 4.0 per cent, and nominal yields varying around 5.5 or 6.0 per cent. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Business fluctuations and cycles, Inflation targets, Inflation: costs and benefits
Un modèle « PAC » d'analyse et de prévision des dépenses des ménages américains Staff Working Paper 2003-13 Marc-André Gosselin, René Lalonde Traditional structural models cannot distinguish whether changes in activity are a function of altered expectations today or lagged responses to past plans. Polynomial-adjustment-cost (PAC) models remove this ambiguity by explicitly separating observed dynamic behaviour into movements that have been induced by changes in expectations, and responses to expectations, that have been delayed because of adjustment costs. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Economic models JEL Code(s): C, C3, C32, E, E2, E21, E3, E32
The Macroeconomic Effects of Military Buildups in a New Neoclassical Synthesis Framework Staff Working Paper 2003-12 Alain Paquet, Louis Phaneuf, Nooman Rebei The authors study the macroeconomic consequences of large military buildups using a New Neoclassical Synthesis (NNS) approach that combines nominal rigidities within imperfectly competitive goods and labour markets. They show that the predictions of the NNS framework generally are consistent with the sign, timing, and magnitude of how hours worked, after-tax real wages, and output actually respond to an upsurge in military purchases. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, Fiscal policy JEL Code(s): E, E3, E32, E6, E62, H, H2
Comparing Alternative Output-Gap Estimators: A Monte Carlo Approach Staff Working Paper 2003-8 Andrew Rennison The author evaluates the ability of a variety of output-gap estimators to accurately measure the output gap in a model economy. A small estimated model of the Canadian economy is used to generate artificial data. 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, C1, C15, E, E3, E32
Salaire réel, chocs technologiques et fluctuations économiques Staff Working Paper 2002-42 Dominique Tremblay The author presents empirical evidence that he has obtained from an analysis of the response of different economic variables, including the real wage rate, to a technology shock. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): C, C3, C32, E, E2, E24, E3, E32
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
Inflation Expectations and Learning about Monetary Policy Staff Working Paper 2002-30 David Andolfatto, Scott Hendry, Kevin Moran Various measures indicate that inflation expectations evolve sluggishly relative to actual inflation. In addition, they often fail conventional tests of unbiasedness. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E4, E47, E5, E52, E58
Habit Formation and the Persistence of Monetary Shocks Staff Working Paper 2002-27 Hafedh Bouakez, Emanuela Cardia, Francisco Ruge-Murcia This paper studies the persistent effects of monetary shocks on output. Previous empirical literature documents this persistence, but standard general-equilibrium models with sticky prices fail to generate output responses beyond the duration of nominal contracts. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Monetary policy transmission JEL Code(s): E, E3, E4, E5
Estimated DGE Models and Forecasting Accuracy: A Preliminary Investigation with Canadian Data Staff Working Paper 2002-18 Kevin Moran, Veronika Dolar This paper applies the hybrid dynamic general-equilibrium, vector autoregressive (DGE-VAR) model developed by Ireland (1999) to Canadian time series. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E3, E32, E37