This paper proposes a theoretical framework to analyze the relationship between credit shocks, firm defaults and volatility, and to study the impact of credit shocks on business cycle dynamics. Firms are identical ex ante but differ ex post due to different realizations of firm-specific...

The authors examine the Bank of Canada's overnight rate as a measure of monetary policy in vector autoregression (VAR) models.

A vector error-correction Model (VECM) that Forecasts inflation between the current quarter and eight quarters ahead is found to privide significant leading information about inflation. The model focusses on th effects of deviations of M1 from its long-run demand but also includes, among other...