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This paper proposes a new measure of potential output for the USA. The key idea is that potential output is constructed as the level of output which would correspond to aforecastof no inflation change over the policy horizon. The resultant output gap has a clear interpretation as a measure to gauge future inflationary pressures. It also exhibits better predictability for future inflation changes in comparison with previous output gap measures. Simulation results further demonstrate its usefulness as a feedback variable in the Taylor monetary policy rule for interest rates.

A strand of theoretical and empirical evidence in the literature suggests non‐linearity in the output‐inflation relationship, viz. a non‐linear Phillips curve. We develop a VAR model of output, inflation, and terms of trade augmented with logistic smooth transition autoregression specifications. Empirically, the model captures non‐linear features present in the data. Output costs of reducing inflation vary, depending on the economy, size of inflation change, and whether policy makers seek to disinflate or prevent inflation from rising. Thus, inferences based on the conventional linear Phillips curve may provide misleading signals about the cost of lowering inflation and the appropriate policy stance. JEL Classification: C32, E52 Le coût asymétrique en termes de production de la réduction de l'inflation: résultats pour le Canada. Ce mémoire a son origine dans les travaux qui suggèrent une certaine non linéarité dans la relation production‐inflation i.e. une courbe de Phillips qui serait non‐linéaire. Les auteurs utilisent un modèle VAR de la production, de l'inflation et des termes d'échange, enrichi de spécifications autogressives définissant une transition logistique souple. Il appert que les coûts en termes de perte de production de la réduction de l'inflation varient grandement selon l'état de l'économie, la taille des changements recherchés dans le taux d'inflation, et selon que les autorités cherchent créer une déflation ou simplement à empêcher l'accélération de l'inflation. Voilà qui implique que les inférences tirées d'un modèle construit sur la courbe linéaire traditionnelle de Phillips peuvent fournir des signaux trompeurs quant aux coûts de la réduction de l'inflation et suggérer de mauvaises politiques.

The central objective of this paper is to empirically evaluate the degree of linkages among East Asian equity and bond markets. The primary contribution of our paper to the empirical literature is that we use a financial gravity model grounded in economic theory. Using data from the International Monetary Fund's Coordinated Portfolio Investment Survey, we find that intra-East Asian financial asset holdings of four East Asian economies - Hong Kong, China; Japan; the Republic of Korea; and Singapore - are larger than the levels predicted by the financial gravity model. However, our analysis suggests that this result is likely to be driven by intraregional trade linkages, and reflects those linkages. Therefore, the salient implication for regional policy makers is that they should continue to promote intraregional financial integration. This paper also aims to analyze the impact of three different types of country-specific risks - political, economic, and financial risks - on investment from the four economies. This analysis yields a clear positive relationship between destination-country risk, particularly political risk and capital inflows.