Economic models
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Information, Risk Sharing and Incentives in Agency Problems
This paper studies the use of information for incentives and risk sharing in agency problems. When the principal is risk neutral or the outcome is contractible, risk sharing is unnecessary or completely taken care of by a contract on the outcome. -
International Spillovers of Large-Scale Asset Purchases
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. -
Measuring Potential Output at the Bank of Canada: The Extended Multivariate Filter and the Integrated Framework
Estimating potential output and the output gap - the difference between actual output and its potential - is important for the proper conduct of monetary policy. However, the measurement and interpretation of potential output, and hence the output gap, is fraught with uncertainty, since it is unobservable. -
Addressing Household Indebtedness: Monetary, Fiscal or Macroprudential Policy?
In this paper, we build a dynamic stochastic general-equilibrium model with housing and household debt, and compare the effectiveness of monetary policy, housing-related fiscal policy, and macroprudential regulations in reducing household indebtedness. -
On the Importance of Sales for Aggregate Price Flexibility
Macroeconomists have traditionally ignored the behavior of temporary price markdowns (“sales”) by retailers. Although sales are common in the micro price data, they are assumed to be unrelated to macroeconomic phenomena and generally filtered out. -
Integrating Uncertainty and Monetary Policy-Making: A Practitioner’s Perspective
This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making. -
Commodity Price Co-Movement and Global Economic Activity
Guided by a macroeconomic model in which non-energy commodity prices are endogenously determined, we apply a new factor-based identification strategy to decompose the historical sources of changes in commodity prices and global economic activity. -
Analyzing and Forecasting the Canadian Economy through the LENS Model
The authors describe the key features of a new large-scale Canadian macroeconomic forecasting model developed over the past two years at the Bank of Canada. -
Optimal Margining and Margin Relief in Centrally Cleared Derivatives Markets
A major policy challenge posed by derivatives clearinghouses is that their collateral requirements can rise sharply in times of stress, reducing market liquidity and further exacerbating downturns.