Economic models

• Booms and Busts in House Prices Explained by Constraints in Housing Supply

  Staff Working Paper 2013-18 Narayan Bulusu, Jefferson Duarte, Carles Vergara-Alert

  We study the importance of supply constraints in explaining the heterogeneity in house price cycles across geographies in the United States.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Economic models JEL Code(s): R, R3, R31

• Are Sunspots Learnable? An Experimental Investigation in a Simple General-Equilibrium Model

  Staff Working Paper 2013-14 Jasmina Arifovic, George Evans, Olena Kostyshyna

  We conduct experiments with human subjects in a model with a positive production externality in which productivity is a non-decreasing function of the average level of employment of other firms.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models JEL Code(s): D, D8, D83, G, G2, G20

• Jump-Diffusion Long-Run Risks Models, Variance Risk Premium and Volatility Dynamics

  Staff Working Paper 2013-12 Jianjian Jin

  This paper calibrates a class of jump-diffusion long-run risks (LRR) models to quantify how well they can jointly explain the equity risk premium and the variance risk premium in the U.S. financial markets, and whether they can generate realistic dynamics of risk-neutral and realized volatilities.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Economic models JEL Code(s): G, G1, G12, G17

• An Equilibrium Analysis of the Rise in House Prices and Mortgage Debt

  Staff Working Paper 2013-9 Shaofeng Xu

  This paper examines the contributions of population aging, mortgage innovation and historically low interest rates to the sharp rise in U.S. house prices and mortgage debt between 1994 and 2005.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Credit and credit aggregates, Economic models JEL Code(s): E, E2, E21, E4, E44, G, G1, G11, R, R2, R21

• Countercyclical Bank Capital Requirement and Optimized Monetary Policy Rules

  Staff Working Paper 2013-8 Carlos De Resende, Ali Dib, René Lalonde, Nikita Perevalov

  Using BoC-GEM-Fin, a large-scale DSGE model with real, nominal and financial frictions featuring a banking sector, we explore the macroeconomic implications of various types of countercyclical bank capital regulations. Results suggest that countercyclical capital requirements have a significant stabilizing effect on key macroeconomic variables, but mostly after financial shocks.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial institutions, Financial stability, International topics JEL Code(s): E, E3, E32, E4, E44, E5, G, G1, G2

• A Tractable Monetary Model Under General Preferences

  Staff Working Paper 2013-7 Tsz-Nga Wong

  Consider the monetary model of Lagos and Wright (JPE 2005) but with general preferences and general production. I show that preferences satisfying UXXUHH – (UXH)2 = 0 is a sufficient condition for the existence and uniqueness of monetary equilibrium with degenerate money distribution.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models JEL Code(s): D, D8, D83, E, E4, E40

• How Important Are Liquidity Constraints for Canadian Households? Evidence from Micro-Data

  Staff Discussion Paper 2012-9 Umar Faruqui, Samah Torchani

  Using a unique micro-dataset containing real and financial information on Canadian households for 2000–07, the authors address two questions: (1) What is the proportion of households whose consumption displays excess sensitivity to income, and who are likely liquidity constrained?

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Economic models, Sectoral balance sheet JEL Code(s): C, C3, C35, D, D1, D12, D3, D30

• Commodities and Monetary Policy: Implications for Inflation and Price Level Targeting

  Staff Working Paper 2012-16 Donald Coletti, René Lalonde, Paul Masson, Dirk Muir, Stephen Snudden

  We examine the relative ability of simple inflation targeting (IT) and price level targeting (PLT) monetary policy rules to minimize both inflation variability and business cycle fluctuations in Canada for shocks that have important consequences for global commodity prices.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Inflation and prices, International topics, Monetary policy framework JEL Code(s): E, E1, E17, E3, E31, E37, E5, E52, F, F4, F41, Q, Q4, Q43

• House Price Dynamics: Fundamentals and Expectations

  Staff Working Paper 2012-12 Eleonora Granziera, Sharon Kozicki

  We investigate whether expectations that are not fully rational have the potential to explain the evolution of house prices and the price-to-rent ratio in the United States.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Domestic demand and components, Economic models JEL Code(s): E, E3, E6, E65, R, R2, R21

• Macroprudential Rules and Monetary Policy when Financial Frictions Matter

  Staff Working Paper 2012-6 Jeannine Bailliu, Césaire Meh, Yahong Zhang

  This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as standard macroeconomic shocks.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets, Financial stability, Monetary policy framework JEL Code(s): E, E4, E42, E5, E50, E6, E60