This paper proposes a simple analytical method to determine the stationarity of an unnormalized variable from the solution to a normalized model i.e. a model whose variables must be expressed in relative terms or must be differenced for a solution to exist. The paper then applies the methodto...

The purpose of this paper is to make a quantitative contribution to the inflation versus price level targeting debate. It considers a policy-maker that can set policy either through an inflation targeting rule or a price level targeting rule to minimize a quadratic loss function using the actual...

We construct a small-open-economy, New Keynesian dynamic stochastic generalequilibrium model with real-financial linkages to analyze the effects of financial shocks and macroprudential policies on the Canadian economy. Our model has four key features. First, it allows for non-trivial...

This paper studies the cost of limited commitment when a central bank has the discretion to adjust policy whenever the costs of honoring its past commitments become high. Specifically, we consider a central bank that seeks to implement optimal policy in a New Keynesian model by committing to a...