This paper tests the balance sheet theory, where the status of balance sheets affects the economy´s response to monetary and other shocks. The theory predicts a positive effect of cash flow on investment, given fundamental determinants of investment. I use an empirical method developed by...

The transmission effect of money has been a frequently debated issue. This paper discusses the empirical literature examining the effect of money on real output. In contrast to the commonly held belief that money has a powerful effect on output, most empirical tests of money shows relatively...

What are the implications of targeting different measures of inflation? We extend a basic theoretical framework of optimal monetary policy under inflation targeting to include several components of CPI inflation ratio, and analyze the implications of using different measures of inflation as...

The analysis of this paper demonstrates that when the Phillips curve has forward-looking components, a goal for average inflation - i.e. targeting a j-period average of one-period inflation rates - will cause inflation expectations to change in a way that improves the short-run trade-off faced...

We present data from the Survey of Consumer Finances showing that the increased earnings (labor income) inequality, in combination with increased stockmarket partic- ipation, has roughly doubled stockholders’share of aggregate labor income in the last four decades. We explore the impact of the...

We use a standard quantitative business cycle model with nominal price and wage rigidities to estimate two measures of economic inefficiency in recent U.S. data: the output gap - the gap between the actual and efficient levels of output - and the labor wedge - the wedge between households'...

Previous studies of the sources of real exchange rate fluctuations have concluded that real demand shocks account for the bulk of the movements in real exchange rates. In this paper, bilateral real exchange rates between the US, the UK, Germany and Japan are investigated using a statistical...

Supervisors sometimes have to manage both the micro- and macro- prudential dimensions of bank stability. These may either conflict or complement each other. We analyze prudential supervision by the Central Bank of Russia (CBR). We find evidence of micro-prudential concerns, measured as the...

Not available.

In this paper, we offer one possible way to estimate a key feature of the Bank of Canada’s main macroeconomic model, the Quarterly Projection Model or QPM. The key feature which is the focus of this study is the so-called "short-run equilibrium values" or SREQs which link the dynamic portion...