We use narrative evidence along with a novel database of real-time data and forecasts from the Bank of Canada's staff economic projections from 1974 to 2015 to construct a new measure of monetary policy shocks and estimate the effects of monetary policy in Canada. We show that it is crucial to...

We analyze the interaction between committed monetary policy and discretionary fiscal policy in a model with public debt, endogenous government expenditures, distortive taxation and nominal rigidities. Fiscal decisions lack commitment but are Markovperfect. Monetary commitment to an interest...

Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations. We find that the region of allowed...

We add downward nominal wage rigidity to a standard New Keynesian model with sticky prices and wages, where the zero lower bound on nominal interest rates is allowed to bind. We find that wage rigidity not only reduces the frequency of zero bound episodes but also mitigates the severity of...

Macroeconomists have traditionally ignored the behavior of temporary price markdowns ("sales") by retailers. Although sales are common in the micro price data, they are assumed to be unrelated to macroeconomic phenomena and generally filtered out. We challenge this view. First, using the 1996 -...

The first contribution of this paper is to develop a model that jointly accounts for the missing disinflation in the wake of the Great Recession and the subsequently observed inflation-less recovery. The key mechanism works through heterogeneous expectations that may durably lose their anchorage...

In a simple two-sector New Keynesian model, sticky prices generate a counterfactual negative comovement between the output of durable and nondurable goods following a monetary policy shock. We show that heterogeneous factor markets allow any combination of strictly positive price stickiness to...

Recent international experience with the effective lower bound on nominal interest rates has rekindled interest in the benefits of inflation targets above 2 per cent. We evaluate whether an increase in the inflation target to 3 or 4 per cent could improve macroeconomic stability in the Canadian...

To better understand the dynamics of the Chinese economy and its interaction with the global economy, the authors incorporate China into an existing model for the G-3 economies (i.e., the United States, the euro area, and Japan), paying particular attention to modelling the exchange rate and...

I present a structural econometric analysis supporting the hypothesis that money is still relevant for shaping inflation and output dynamics in the United States. In particular, I find that real money balance effects are quantitatively important, although smaller than they used to be in the...