Monetary policy transmission

• Alternative Public Spending Rules and Output Volatility

  Staff Working Paper 2002-37 Jean-Paul Lam, William Scarth

  One of the central lessons learned from the Great Depression was that adjusting government spending each year to balance the budget increases the volatility of output.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Fiscal policy, Monetary policy transmission JEL Code(s): E, E5, E52, E58, E6, E62

• Labour Markets, Liquidity, and Monetary Policy Regimes

  Staff Working Paper 2002-32 David Andolfatto, Scott Hendry, Kevin Moran

  We develop an equilibrium model of the monetary policy transmission mechanism that highlights information frictions in the market for money and search frictions in the market for labour.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy and uncertainty, Monetary policy transmission JEL Code(s): E, E4, E5

• 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 Topic(s): Business fluctuations and cycles, Monetary policy transmission JEL Code(s): E, E3, E4, E5

• Nominal Rigidity, Desired Markup Variations, and Real Exchange Rate Persistence

  Staff Working Paper 2002-26 Hafedh Bouakez

  This paper develops and estimates a dynamic general-equilibrium sticky-price model that accounts for real exchange rate persistence.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Market structure and pricing, Monetary policy transmission JEL Code(s): F, F3, F31, F4, F41

• Corporate Bond Spreads and the Business Cycle

  Staff Working Paper 2002-15 Zhiwei Zhang

  This paper examines the predictive power of credit spreads from the corporate bond market. The high-yield bond spread and investment-grade spread can explain 68 per cent and 42 per cent of output variations one year ahead, while the term spread based on government debts can explain only 12 per cent of them.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Monetary and financial indicators, Monetary policy transmission JEL Code(s): E, E3, E5, G, G1