The effective conduct of monetary policy is complicated by uncertainty about the level of potential output, and thus about the size of the monetary policy response that would be sufficient to achieve the targeted inflation rate. One possible response to such uncertainty is for the monetary...

The author describes results obtained by using a new methodology to estimate potential output for the United Kingdom. The estimation method, which follows Rennison (2003) and Gosselin and Lalonde (2002), shows that combining the use of a Hodrick-Prescott filter and a structural vector...

Korea’s rapid growth has slowed in recent years, suggesting lower potential growth. This paper uses an array of techniques, including statistical filters, a multivariate model and the production function, to estimate Korea’s potential growth. The main finding is that trend growth...

In this paper we present various techniques to estimate Sri Lanka’s potential output and output gap, including statistical and model-based approaches. Compared to conventional statistical filters that rely exclusively on information in a single series, the model-based approaches allow...

The Middle East and Central Asia’s economic growth potential is slowing faster than in other emerging and developing regions, dampening hopes for reducing persistent unemployment and improving the region’s generally low living standards. Why? And is it possible to alter this...

The recent global financial crisis illustrates that financial frictions are a significant source of volatility in the economy. This paper investigates monetary policy stabilization in an environment where financial frictions are a relevant source of macroeconomic fluctuation. We derive a measure...

Rising consumer prices may reflect shifts by consumers to new higher-priced products, mostly for durable and semi-durable goods. I apply Bils’ (2009) methodology to newly available Canadian consumer price data for non-shelter goods and services to estimate how price increases can be divided...

We estimate a New Keynesian general-equilibrium open economy model to examine how changes in oil prices affect the macroeconomy. Our model allows oil price changes to be transmitted through temporary demand and supply channels (affecting the output gap), as well as through persistent supply side...

This paper asks: What is the effect of government policy on output and inequality in an environment with education and labor-supply decisions? The answer is given in a general equilibrium model, consistent with the post 1960s facts on male wage inequality and labor supply in the U.S. In the...