The authors use a dynamic general-equilibrium model to study the role financial frictions play as a transmission mechanism of Canadian monetary policy, and to evaluate the real effects of exogenous credit shocks. Financial frictions, which are modelled as spreads between deposit and loan interest rates, are assumed to depend on economic activity as well as on credit shocks. A general finding is that almost all of the real response to a monetary policy shock comes from the price rigidity and not the credit frictions. Credit shocks, however, do have substantial real effects on macroeconomic variables. Thus, in this model, imperfections in credit markets are responsible only for a small amplification and propagation of the real effects of monetary policy shocks.

This study estimates the potential implications of the implementation of African Continental Free Trade Area (AfCFTA) Agreement for Ghana in terms of trade, welfare and revenue effects. By applying the WITS-SMART simulation model on 2018 disaggregated international trade data, the paper finds that total trade effects in Ghana are likely to surge by US$ 148.3 million while promoting consumers' welfare by US$ 8.597 million. However, revenue losses are imminent as the country might experience a drop in tariff revenue of US$ 8.604 million. Overall, the free trade area is expected to improve on the country's trade balance as exports are envisaged to outweigh imports. In order to mitigate the revenue losses, the paper recommends that the country keep substantial portion of tariff lines for sensitive and excluded products over a longer period during the liberalization.

The author reexamines the demand-for-money theory in an intertemporal optimization model. The demand for real money balances is derived to be a function of real income and the rates of return of all financial assets traded in the economy. Unlike the traditional money-demand relation, however, where the elasticities are assumed to be constant, the coefficients of the explanatory variables are not constant and depend on the degree of an agent's risk aversion, the volatilities of the price level and income, and the correlation of asset returns. The author shows that the response of households to increased volatilities in the financial markets, economic activity, and prices cannot be predicted, because a rise in general uncertainties has an ambiguous impact on the demand for money. This suggests that increased uncertainty is not very helpful for the planning decisions of households, because the optimal level of money holdings in the period of uncertainty cannot be ascertained.

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