This paper derives an interest rate rule for monetary policy in which the interest rate response of the central bank toward an increase in expected inflation falls as debts increase beyond a certain threshold level. A debt-constrained interest rate rule and the threshold level of debt are...

This paper reexamines some unsettled theoretical and empirical issues regarding the relationship between nominal exchange rates and interest rate differentials and provides a model for the behavior of exchange rates in the long run, where interest rates are determined in the bond market. The...

This paper studies changes in Canada''s monetary policy transmission, associated with the important changes in financial structure experienced in the 1990''s, using two methodologies. First, VAR models show a clear break in monetary transmission beginning in 1988, after changes in financial...

This paper studies stylized business cycle properties of household production in four industrialized countries (Canada, the United States, Germany, and Japan). We employ a dynamic small open economy business cycle model that incorporates a household production sector. We use the model to...

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group appear...

This paper examines the effect of the major Canada-U.S. trade agreements on the dynamics of business cycles and productivity in Canada. The North American Free Trade Agreement (NAFTA) and its predecessor, the Canada-U.S. Free Trade Agreement (CUSFTA), have led to a substantial expansion of trade...

This paper develops and estimates a game-theoretical model of inflation targeting where the central banker''s preferences are asymmetric around the targeted rate. Specifically, positive deviations from the target can be weighted more, or less, severely than negative ones in the central banker''s...

This paper explores international bond spillovers using daily and intra-day data on yields on inflation-indexed bonds and associated inflation expectations for the United States, Australia, Canada, France, Sweden, Japan, and the United Kingdom. The analysis starts in 2002, by which point U.S....

This paper develops a method of testing levels of economic integration based upon consumption smoothing, and tests it using data on trade balances across Canadian provinces. The results indicate the provinces are highly integrated within Canada, but integration between Canada and the rest of the...

Under a federal system of government, the division of responsibilities between the federal, provincial/state, and local levels of government may create internal barriers to trade. To deal with this problem, the federal and provincial governments in Canada established the Agreement on Internal...