In monetary policy strategies geared towards maintaining price stability conditional and unconditional forecasts of inflation and output play an important role. In this paper we illustrate how modern sticky-price dynamic stochastic general equilibrium (DSGE) models, estimated using Bayesian...

The paper models the interaction between risk taking in the financial sector and central bank policy. It shows that in the absence of central bank intervention, the incentive of financial intermediaries to free ride on liquidity in good states may result in excessively low liquidity in bad...

The paper models the links between financial fragility, asset markets and monetary policy. It is shown that central bank's concern about the cost of financial disruption generates an asymmetric response, thus contributing to the creation of an asset price bubble. In an economy with a highly...

We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel - monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel exists and tends to concentrate on the bank funding side. Then, to...

This study empirically investigates how shocks to monetary policy measures (short-term nominal interest rate and broad money supply) affect economic aggregates: output growth, price levels and nominal exchange rate. The study is carried out for Pakistan using quarterly data covering the period...

The problems posed by monetary policy cannot be dealt with by legislating enduring policy rules. With the passage of time, economic understanding does not systematically converge ever more closely on a "true" model of the economy, a process which is now sufficiently far along that our current...

In this paper we explore the nexus between cross-border trade integration and monetary policy. We first review the evidence that trade liberalization has increased the degree of integration in North America and conclude that, while robust structural inferences remain elusive, there is sufficient...

In Canada, targeting the inflation rate was intended as a temporary measure on a journey to price-level stability, but became a well-established monetary policy regime in its own right. This paper analyses the role of the interaction of economic ideas with the experience generated by their...

This paper critically evaluates two different approaches to teaching macroeconomics at the undergraduate level through the comparison of two popular, recent handbooks: Olivier Blanchard's Macroeconomics (2021) and William Mitchell, Randall Wray and Martin Watts's Macroeconomics (2019). These...