Economic models
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ToTEM III: The Bank of Canada’s Main DSGE Model for Projection and Policy Analysis
ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution. -
Monetary Policy, Trends in Real Interest Rates and Depressed Demand
Over the last few decades, real interest rates have trended downward. The most common explanation is that this reflects depressed demand due to demographic, technological and other real factors. We explore the claim that these trends may have been amplified by certain features of monetary policy. -
The Geography of Pandemic Containment
Interconnectedness between US states has affected the evolution of the COVID-19 pandemic. We study the optimal containment policies regulating the movement of goods and people within and between states. -
Potential output and the neutral rate in Canada: 2021 update
We expect potential output growth to be higher than in the October 2020 reassessment. By 2024, growth will be slightly above its average growth from 2010 to 2019. We assess that the Canadian nominal neutral rate continues to lie in the range of 1.75 to 2.75 percent. -
Trade and Market Power in Product and Labor Markets
Trade liberalizations increase the sales and input purchases of productive firms relative to their less productive domestic competitors. This reallocation affects firms’ market power in their product and input markets. I quantify how the labour market power of employers affects the distribution and size of the gains from trade. -
How Long is Forever in the Laboratory? Three Implementations of an Infinite-Horizon Monetary Economy
Standard monetary models adopt an infinite horizon with discounting. Testing these models in the lab requires implementing this horizon within a limited time frame. We compare three approaches to such an implementation and discuss their relative advantages. -
Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform
How do firms change their employment decisions when tax benefits for low-earning workers are expanded? Some firms increase employment overall, whereas others replace high-earning workers with low-earning workers, according to German linked employer-employee data. -
Occasionally Binding Constraints in Large Models: A Review of Solution Methods
Solving macroeconomic models is difficult. One challenge is the occasionally binding constraint of the zero lower bound on nominal interest rates. This paper reviews various ways to solve models that include this feature. -
(Optimal) Monetary Policy with and without Debt
How should policy be designed at high debt levels, when fiscal authorities have little room to adjust taxes? Assigning the monetary authority a role in achieving debt sustainability makes it less effective in stabilizing inflation and output.