E3 - Prices, Business Fluctuations, and Cycles

• 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 Topic(s): Business fluctuations and cycles, Economic models, Fiscal policy JEL Code(s): E, E3, E32, E6, E62, H, H2

• Bank Lending, Credit Shocks, and the Transmission of Canadian Monetary Policy

  Staff Working Paper 2003-9 Joseph Atta-Mensah, Ali Dib

  The authors use a dynamic general-equilibrium model to study the role financial frictions play as a transmission mechanism of Canadian monetary policy, and to evaluate the real effects of exogenous credit shocks. Financial frictions, which are modelled as spreads between deposit and loan interest rates, are assumed to depend on economic activity as well as on credit shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E3, E32, E4, E5, E51