This paper estimates and simulates a sticky-price dynamic stochastic general-equilibrium model with a financial accelerator, à la Bernanke et al. [Bernanke, B., Gertler, M., Gilchrist, S., 1999. The financial accelerator in a quantitative business cycle framework. In: Handbook of Macroeconomics. North-Holland, Amsterdam], to assess the importance of the financial accelerator mechanism in fitting the data and its role in the amplification and propagation of transitory shocks. Structural parameters of two models, one with and one without a financial accelerator, are estimated using a maximum-likelihood procedure and post-1979 US data. The estimation and simulation results provide quantitative evidence in favor of the financial-accelerator model. The model without a financial accelerator is statistically rejected in favor of a model with it. The presence of the financial accelerator amplifies and propagates the effects of demand shocks on investment, but it dampens those of supply shocks. However, we find that the importance of the financial accelerator for output fluctuations is relatively minor. Crown

We develop a dynamic, stochastic, general-equilibrium (DSGE) model due to Ireland (1997) and others and estimate it for the Canadian economy to analyse the real effects of monetary policy shocks. To generate high and persistent real effects, the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and/or employment. The structural parameters identifying transmission channels are estimated econometrically using a maximum-likelihood procedure with a Kalman filter. The estimated nominal and real rigidities impart substantial and persistent real effects following a monetary policy shock. Furthermore, the results suggest that the monetary authority has accommodated technology shocks and has successfully offset the real effects of money-demand shocks, by actively responding to these shocks. JEL classification: E31, E32, E52 Un mode`le d'e´quilibre ge´ne´ral dynamique et stochastique dote´de rigidite´s nominales et re´elles et calibre´avec des donne´es canadiennes. Dans la pre´sente e´tude, nous de´velop-pons un mode`le d'e´quilibre ge´ne´ral dynamique et stochastique (EGDS), e´labore´par Ireland (1997) et d'autres, et estimons ce mode`le pour l'e´conomie canadienne. Afin de ge´ne´rer des effets re´els conside´rables et persistants des chocs mone´taires, nous inte´grons a`ce mode`le des frictions nominales et re´elles sous la forme de couˆts d'ajustement des prix, du capital et de l'emploi. En utilisant la me´thode du maximum de vraisemblance et le filtre de Kalman, nous estimons les parame`tres structurels du mode`le avec des donne´es canadiennes. Les versions du mode`le d'EGDS dote´de rigidite´s nominales et re´elles ge´ne`rent des effets re´els significatifs et persistants en re´action a`des chocs de politique mone´taire. De plus, les re´sultats sugge`rent que l'autorite´mone´taire re´ussit bien a`contenir les chocs technologiques et a`annuler les effets des chocs de la demande de monnaie.

The authors use a dynamic general-equilibrium model to study the role financial frictions play as a transmission mechanism of Canadian monetary policy, and to evaluate the real effects of exogenous credit shocks. Financial frictions, which are modelled as spreads between deposit and loan interest rates, are assumed to depend on economic activity as well as on credit shocks. A general finding is that almost all of the real response to a monetary policy shock comes from the price rigidity and not the credit frictions. Credit shocks, however, do have substantial real effects on macroeconomic variables. Thus, in this model, imperfections in credit markets are responsible only for a small amplification and propagation of the real effects of monetary policy shocks.

This paper compares monetary policy effects in New-Keynesian models of small open and closed economies fit to Canada. A monetary policy rule allows the central bank to systematically manage the nominal interest rate in response to inflation, output, and money growth variations. The structural parameters of a small open-economy (SOE) and a closed-economy (CE) models are estimated using a maximum-likelihood procedure with a Kalman filter. Estimation results show that the SOE and CE models lead to qualitatively similar estimates for the Canadian economy. Also, the effects of monetary policy shocks, and of other domestic shocks, generated in the SOE model resemble to those generated in the CE model. In addition, the forecast-error decomposition shows that foreign shocks account for small fractions of the variability observed in Canadian macroeconomic variables.Keywords Monetary policy · Price stickiness · Small open and closed economies JEL Classification E31 · E52 · F2 · F3 I am grateful to an anonymous referee, Steve Ambler, Hafedh Bouakez, Brain Doyle, Kevin Moran, and Nooman Rebei for their useful comments and discussions. The views expressed in this paper are those of the author. No responsibility of them should be attributed to the Bank of Canada.A. Dib (B)

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