The authors construct three financial conditions indexes (FCIs) for Canada based on three approaches: an IS-curve-based model, generalized impulse-response functions, and factor analysis. Each approach is intended to address one or more criticisms of the monetary conditions index (MCI) and existing FCIs. To evaluate their three FCIs, the authors consider five performance criteria: the consisten...

When real balances have even a very small productive role, contemporaneous and forwardlooking Taylor-Wicksell rules can induce ubiquitous multiplicities of equilibria and lead to consequences that are unintended by policymakers. This raises the issue of whether it is possible to anchor and stabilize the economy through backward-looking rules. We show that the standard uniqueness results that ar...

This paper examines the role of the monetary instrument choice for local equilibrium determinacy under sticky prices and different fiscal policy regimes. Corresponding to Benhabib et al.’s (2001) results for interest rate feedback rules, the money growth rate should not rise by more than one for one with inflation when the primary surplus is raised with public debt. Under an exogenous primary s...

This paper compares the Calvo model with the Rotemberg model in a fully nonlinear dynamic new Keynesian framework with an occasionally binding zero lower bound (ZLB) on nominal interest rates. Although the two models are equivalent to a first-order approximation, they generate very different results regarding the policy functions and the government spending multiplier based on nonlinear solutio...

Reliable measures of the size and direction of changes in monetary policy are very crucial for examining the effects of monetary policy on the economy. Monetary Condition Index (MCI) can be used as a tool to assess the stance of monetary policy. This index is defined as the weighted average of different monetary transmission mechanism relative to their values in a base period. The weights in MC...

The responsiveness of house prices to monetary policy shocks depends on the nature shock—expansionary versus contractionary—and local housing supply elasticities. These findings are established using a panel 263 US metropolitan areas. Expansionary have larger impact in supply-inelastic Contractionary orthogonal In supply-elastic areas, contractionary greater than expansionary do. opposite holds...

It is proved that, among all restricted preference domains that guarantee consistency (i.e. transitivity) of pairwise majority voting, the single-peaked domain is the only minimally rich and connected domain that contains two completely reversed strict preference orders. It is argued that this result explains the predominant role of single-peakedness as a domain restriction in models of politic...

We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine influence of detected on financial markets. find that, controlling for Reserve’s actions sentiment policy texts, positive tone voices Reserve chairs leads significant increases share prices. Other variables also respond vocal cues from chairs. Hence, how...

Disinflationary episodes are a valuable source of information for economic agents trying to learn about the economy. This paper is especially interested in how a policymaker can themselves learn by disinflating. The approach differs from the existing literature, which typically focuses on the learning of private agents during a disinflation. We build a model where both the policymaker and priva...