Nominal rigidities and monetary policy in Canada

Dib, Ali

doi:10.1016/j.jmacro.2004.07.010

Cited by 17 publications

(31 citation statements)

References 24 publications

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“…The closed economy is similar to the sticky-price models estimated by Dib (2003Dib ( , 2006 for Canada and to those estimated by Ireland (2003) and Christensen and Dib (2008) for the U.S. economy. The estimation procedure is frequently used to estimate NewKeynesian models of closed and open economies.…”

Section: Introductionsupporting

confidence: 69%

“…The small open-economy model is built on Kollmann (2001), Adolfson et al (2007), and Justiniano and Preston (2009) with domestic and import price stickiness, while the closed-economy model is based on Ireland (2003) and Dib (2006). 8 There are five agents: a representative household, a continuum of domestic producers and importers indexed by j ∈ [0, 1], an aggregator, and a monetary authority.…”

Section: The Modelmentioning

confidence: 99%

“…The demand functions derived from the aggregate demand in the monopolistically competitive market are y dt ( j) = p dt ( j) Dib (2006), and Christensen and Dib (2008). where A t is an exogenous technology shock that is identical for all domestic producers. This shock follows the process…”

Section: Domestic-intermediate Goodsmentioning

confidence: 99%

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Monetary Policy in Estimated Models of Small Open and Closed Economies

Dib

2010

Open Econ Rev

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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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Section: Introductionsupporting

confidence: 69%

Section: The Modelmentioning

confidence: 99%

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Monetary Policy in Estimated Models of Small Open and Closed Economies

Dib

2010

Open Econ Rev

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“…This modified Taylor-type rule embeds the standard Taylor (1993) rule (when μ = 0) where the monetary authority changes interest rates in response to inflation and output deviations. In addition, by reacting to money growth, the central bank is able to offset the negative effects of money-demand shocks on economic activity; see Dib (2006). Ireland (2003) estimates this policy rule for the same sample and finds evidence that the coefficient on money growth is positive and statistically significant.…”

Section: Monetary Authoritymentioning

confidence: 99%

The financial accelerator in an estimated New Keynesian model

Christensen

Dib

2008

Review of Economic Dynamics

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263

167

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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

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“…In the data these correlations 6 The introduction of nominal price rigidities using quadratic adjustment costs is equivalent to Calvo (1983)-style nominal price contracts up to a first order approximation, see Dib (2002) appendix C. The ratio η p −1 κ p can therefore be interpreted, at the aggregate level, as the fraction of firms that can adjust their price in any given period. A value of κp 2 = 3.60 implies that the average duration of a price contract is one year.…”

Section: Calibrationmentioning

confidence: 99%

Do Higher Wages Cause Inflation?

Jönsson

Palmqvist²

2006

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractMuch empirical evidence suggests that wage increases do not lead to inflation. This paper demonstrates that a 2-sector dynamic general equilibrium model calibrated to the U.S. economy is able to explain this evidence. We quantify the effect of an increased wage-markup on the inflation rate in both the goods sector and the service sector. The mechanisms we emphasize and quantify are changes in relative prices and monetary policy. We find that our model is successful in explaining the empirical evidence. Quantitatively, the relative price effect is more important than monetary policy in mitigating the effect of higher wage-markups.JEL classification: D43, E31, E52.

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Nominal rigidities and monetary policy in Canada

Cited by 17 publications

References 24 publications

Monetary Policy in Estimated Models of Small Open and Closed Economies

Monetary Policy in Estimated Models of Small Open and Closed Economies

The financial accelerator in an estimated New Keynesian model

Do Higher Wages Cause Inflation?

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