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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jedc.2009.10.009 Byline: Cesaire A. Meh (a), Kevin Moran (b) Abstract: The recent financial turmoil has underlined the importance of analyzing the link between banks' balance sheets and economic activity. We develop a dynamic stochastic general equilibrium model in which bank capital mitigates an agency problem between banks and their creditors. As a result, the capital position of banks affects their ability to attract loanable funds and therefore influences the business cycle through a bank capital channel of transmission. We find that the bank capital channel greatly amplifies and propagates the effects of technology shocks on output, investment and inflation. Moreover, bank capital shocks create sizeable declines in output and investment. Author Affiliation: (a) Bank of Canada, Canadian Economic Analysis Department, 234 Wellington, Ottawa, ON, Canada K1A 0G9 (b) Departement d'economique, Universite Laval, Quebec, QC, Canada G1K 7P4 Article History: Received 19 June 2008; Accepted 8 September 2009

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jmoneco.2009.03.001 Byline: Robert Amano (a), Kevin Moran (b), Stephen Murchison (a), Andrew Rennison (a) Abstract: What are the steady-state implications of inflation in a general-equilibrium model with real per capita output growth and staggered nominal price and wage contracts? Surprisingly, a benchmark calibration implies an optimal inflation rate of -1.9 percent. The analysis also shows that trend inflation has important effects on the economy when combined with nominal contracts and real output growth. Steady-state output and welfare losses are quantitatively important even for low values of trend inflation. Further, nominal wage contracting is found to be quantitatively more important than nominal price contracting in generating the results. This conclusion does not arise from price dispersion per se, but from an effect of nominal output growth on the optimal markup of monopolistically competitive labour suppliers. Finally, accounting for productivity growth is found to be important for calculating the welfare costs of inflation. Indeed, the presence of 2 percent productivity growth increases the welfare costs of inflation in the benchmark specification by a factor of four relative to the no-growth case. Author Affiliation: (a) Research Department, Bank of Canada, Ottawa, ON, Canada K1A 0G9 (b) Departement d'economique, Universite Laval, Quebec City, PQ, Canada G1K 7P4 Article History: Received 24 December 2007; Revised 1 March 2009; Accepted 2 March 2009

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1365-2966.2008.00458.x Byline: Ali Dib (1), Mohamed Gammoudi (2), Kevin Moran (3) Keywords: E32; E37 Abstract: Abstract. This paper assesses the out-of-sample forecasting accuracy of the New Keynesian Model for Canada. We estimate a variant of the model on a series of rolling subsamples, computing out-of-sample forecasts one to eight quarters ahead at each step. We compare these forecasts with those arising from vector autoregression (VAR) models, using econometric tests of forecasting accuracy. We show that the forecasting accuracy of the New Keynesian Model compares favourably with that of the benchmarks, particularly as the forecasting horizon increases. These results suggest that the model could become a useful forecasting tool for Canadian time series. Abstract (Spanish): Prevision des series chronologiques canadiennes a l'aide d'un nouveau modele keynesien. Ce memoire evalue la precision des previsions d'un nouveau modele keynesien pour le Canada a partir d'echantillons. On calibre une variante du modele sur la base d'une serie de sous echantillons recurrents de previsions de un a huit trimestres d'avance a chaque etape. On compare ces previsions a celles qui emergent de modeles d'auto regression vectorielle (VAR) en utilisant des tests econometriques de precision de prevision. On montre que la precision des previsions du nouveau modele keynesien se compare favorablement a celles des previsions de reference, particulierement a proportion que l'horizon temporel s'accroit. Ces resultats suggerent que le modele peut devenir un instrument utile de prevision pour les series chronologiques canadiennes. Author Affiliation: (1)Bank of Canada (2)Bank of Canada (3)Departement d'economique, Universite Laval

We develop an equilibrium model of the monetary policy transmission mechanism that highlights information frictions in the market for money and search frictions in the labour market. The information friction increases the persistence in the response of interest rates following monetary policy regime shifts. This occurs because agents have incomplete information about the nature of the shifts and optimally update their inflation forecasts using an 'adaptive' expectations rule. The search friction transmits the interest rate movements to the labour market by affecting job creation activities; together, the two frictions imply that unemployment reacts very gradually to monetary policy shocks. JEL Classification: E4, E5 Marches du travail, liquidite, et regimes de politiques monetaires. Les auteurs developpent un module d'equilibre general du mecanisme de transmission des effets de la politique monetaire qui souligne les frictions informationnelles dans le marche de la monnaie et les frictions dans le processus de recherche d'emploi dans le marche du travail. Un changement dans le regime de politique monetaire, qu'on presente ici comme une reduction exogene dans le taux cible a long terme de la croissance du stock de monnaie se traduit par un manque persistant de liquidite et un accroissement persistant du taux d'interet. Cette persistance se produit parce que les agents ont une information incomplete quant a la nature du choc, ce qui les amene a optimiser l'ajustement de leur prevision d'inflation en utilisant une regle d'anticipations adaptatives. La periode de haut taux d'interet reduit les activites de creation d'emploi darts le

This article examines both community and State involvement in developing a program for the teaching of swimming and water safety in post World War II New Zealand. The author maintains that adding aquatics education to primary school curriculum, intended to prevent drowning and for recreational purposes, demonstrated the importance of State and community involvement in education.