This paper explores optimal policy design in an estimated model of three small open economies: Australia, Canada and New Zealand. Within a class of generalized Taylor rules, we show that to stabilize a weighted objective of output consumer price inflation and nominal interest variation optimal...

This paper evaluates whether an estimated, structural, small open economy model of the Canadian economy can account for the substantial influence of foreign-sourced disturbances identified in numerous reduced-form studies. The analysis shows that the benchmark model --- and a number of variants...

This paper evaluates whether an estimated, structural, small open economy model of the Canadian economy can account for the substantial influence of foreign-sourced disturbances indentified in numerous reduced-form studies. The analysis shows that the benchmark model - and a number of variants...

This paper demonstrates that an estimated, structural, small open economy model of the Canadian economy cannot account for the substantial influence of foreign-sourced disturbances identified in numerous reduced-form studies. The benchmark model assumes uncorrelated shocks across countries and...

This paper develops a small open economy model where entrepreneurs partially finance investment using foreign currency denominated debt subject to a risk premium above and beyond international interest rates. We use Bayesian estimation techniques to evaluate the importance of balance sheet...

We set-up a real business cycle model with search and matching frictions driven by several shocks, which nests full Nash Bargaining and wage rigidity as special cases and includes other transmission mechanisms suggested by the literature for the propagation and amplification of disturbances. The...

U.S. households' debt skyrocketed between 2000 and 2007, and has been falling since. This leveraging (and deleveraging) cycle cannot be accounted for by the liberalization, and subsequent tightening, of credit standards in mortgage markets observed during the same period. We base this conclusion...

This paper develops a model of policy regime uncertainty and its consequences for stabilizing expectations. Because of learning dynamics, uncertainty about monetary and fiscal policy is shown to restrict, relative to a rational expectations analysis, the set of policies consistent with...

This paper examines how the scale and composition of public debt can affect economies that implement a combination of “passive” monetary policy and “active” fiscal policy. This policy configuration is argued to be of both historical and contemporary interest in the cases of the U.S. and...