In times of low-inflation, conventional monetary policy is perpetually exposed to the risk of being caught by the liquidity trap. As a part of a pre-emptive monetary policy to avoid the liquidity trap, many economists have pointed out that this risk can be possibly circumvented by targeting a...

Although the concept of monetary policy lag has historical roots deep in the monetary economics literature, relatively little attention has been paid to the idea. In this paper, we build on Svensson’s (1997) inflation targeting framework by explicitly taking into account the lagged effect of...

This paper addresses the empirical dilemma in identifying and estimating the parameters governing the intertemporal elasticity of substitution (IES) for import demand. We propose a new concept, the cross-Euler equation, for overcoming this empirical dilemma. IES parameters are estimated by...

Using Bayesian methods, we estimate a small open economy model in which consumers face limits to credit determined by the value of their housing stock. The purpose of this paper is to quantify the role of collateralized household debt in the Canadian business cycle. Our findings show that the...

We use the standard two-good version of the life cycle/permanent income model in analyzing the intratemporal and intertemporal aspect of food and non-food expenditure in Japan. The empirical dilemma in identifying and estimating the parameters governing the intertemporal elasticity of...

In this paper, we investigate the importance of financial shocks for the Canadian business cycle employing the financial friction DSGE framework following Bernanke, Gertler, and Gilchrist (1999) with an extension of a small-open economy feature. In particular, we explored the importance of an...

In this paper, we propose a new empirical method in testing for the existence of liquidity constraint utilizing the concept of Cross-Euler equation. The Cross-Euler equation represents the optimal consumption pattern of a good in the current period to another good at a future period. It can be...

This paper demonstrates the concavity of the consumption function of infinitely living households under liquidity constraints who are not prudent - i.e. with a quadratic utility. The concavity of the consumption function is closely related to the 3-convexity of the value function.

This paper shows the macroeconomic and welfare implications of an aging population in the United States, using an overlapping-generations model with heterogeneous households. The model uses three population projections in Social Security Administration (2003), and generates economies as...