The article examines the extent of downward nominal wage rigidity in Canada and its implications for monetary policy. The authors ask whether its existence is a sufficient argument for a higher inflation target if concerns about the effective lower bound are adequately addressed.
This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted by Bank of Canada economists has shed light on a number of issues important to monetary policy, such as the relative efficacy between price-level and inflation targeting, and the nature of inflation expectations formation.
The long-run relation between growth and inflation has not yet been studied in the context of nominal price and wage rigidities, despite the fact that these rigidities now figure prominently in workhorse macroeconomic models.
In this paper, we use an economics decision-making experiment to test a key assumption underpinning the efficacy of price-level targeting relative to inflation targeting for business cycle stabilization and mitigating the effects of the zero lower bound on nominal interest rates.
The recent financial crisis and global economic slowdown have renewed interest in monetary policy options when the policy interest rate is at or near zero.
"Risk Premium Shocks and the Zero Bound on Nominal Interest Rates" (with Malik Shukayev). Forthcoming Journal of Money, Credit, and Banking.
"Optimal Price-Level Drift Under Commitment in the Canonical New Keynesian Model" (with Steven Ambler and Malik Shukayev). Canadian Journal of Economics, 45 (3): 1023-1036.
"Trend Inflation, Wage and Price Rigidities, and Productivity Growth" (with Kevin Moran, Stephen Murchison, and Andrew Rennison) Journal of Monetary Economics (2009) 56: 353-364.
"Canadian City Housing Prices and Urban Market Segmentation" (with Jason Allen, David P. Byrne, and Allan W. Gregory). Canadian Journal of Economics (2009) 42: 1132-1149.
"The Macroeconomic Effects of Non-Zero Trend Inflation" (with Steve Ambler and Nooman Rebei). Journal of Money, Credit and Banking (2007) 39: 1819-1836.
"Inflation Persistence and Monetary Policy: A Simple Result" Economics Letters (2007) 94: 26-31.
"Government Expenditures and the Permanent-Income Model" (with Tony Wirjanto) Review of Economic Dynamics (1998) 1: 719-730.
"Intratemporal Substitution and Government Spending" (with Tony Wirjanto) Review of Economics and Statistics (1997) 79: 605-609.
"Intertemporal Substitution, Imports and the Permanent-Income Model" (with Tony Wirjanto) Journal of International Economics (1996) 40: 439-457.
"Nonstationary Regression Model with a Lagged Dependent Variable" (with Tony Wirjanto) Communications in Statistics: Theory and Methods (1996) 25: 1489-1503.
"Terms of Trade and Real Exchange Rates: The Canadian Evidence" (with Simon van Norden) Journal of International Money and Finance (1995) 14: 83-104.
