We develop a new way to test hypotheses about policymakers' targets and implement that test for Canadian monetary policy. For example, if the Bank of Canada is targeting a 2 per cent inflation rate, and if the Bank's instrument takes eight quarters to affect inflation, then deviations of...

This paper explores the relationship between government budget deficits and the real exchange rate. While the conventional view is that a deficit generates real exchange rate appreciation, the experience of many small economies appears to contradict this belief. In this model, the impact of an...

This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. We find that the non-traded output share is as volatile as aggregate GDP and for most countries is countercyclical. While the standard international real business cycle...

This paper examines the effects of taxation in a two-sector model of endogenous growth, based on the joint accumulation of physical and human capital. Both transitional dynamics and balanced growth paths are computed, and the response to wage taxes, capital taxes, and consumption taxes is...

Since the early 1980s, a large body of research has thrown doubt on the relevance of macroeconomic models for understanding exchange rates. The authors argue that a balanced reading of recent literature in exchange rate economics gives a more optimistic assessment. Many studies have established...