, seminar participants at the Bank of Canada and Statistics Canada, and an anonymous reviewer at Statistics Canada for helpful comments. I am very grateful to the Microeconomic Analysis Division of Statistics Canada for providing access to the data and supporting this research through their Ph.D. Stipend program.

seminar participants for helpful comments. We also thank Ryan Felushko and Joan Teske for research assistance.iii AbstractHousing wealth is a large component of total wealth and plays an important role in aggregate business cycles. In this paper, we explore data on real house price cycles at the aggregate level and city level for the United States and Canada. Using a panel of 137 cities, we examine the duration, size, and correlations of housing market cycles in North America. We find that North American housing cycles are long, averaging five years of expansion and four years of contraction, and there is a fairly high degree of correlation in house price cycles between U.S. and Canadian cities. We estimate a discrete time survival model with a probit specification for house price expansions and contractions. This model allows us to test for duration dependence. We find that housing market expansions have positive duration dependence since their exit probabilities increase with duration, while contractions seem to have no duration dependence. Standard determinants of house prices (interest rates, income and population growth) are included as controls. Leur modèle montre que les probabilités de retournement des phases d'expansion augmentent avec la durée, alors que celles des phases de contraction ne semblent pas sensibles au facteur temps. Les auteurs utilisent comme variables de contrôle les déterminants habituels des prix des maisons (taux d'intérêt, revenu et croissance démographique).

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. iii Terms of use: Documents in EconStor may AbstractCentral banks may face challenges in achieving their price stability goals when financial stability risks are present. There is, however, considerable heterogeneity among central banks with respect to how they manage these potential trade-offs. In this paper, we review the institutional and operational policy frameworks of ten central banks in major advanced economies and then assess the effect of financial stability risks on their monetary policy decisions according to these frameworks. To do so, we construct a timevarying financial stability orientation (FSO) index that quantifies a central bank's policy orientation with respect to financial stability that spans the major viewpoints of the literature: "leaning against the wind" versus "cleaning up after the crash." The index encompasses three dimensions: (i) the nature of the statutory frameworks, (ii) the extent of the regulatory tool kit, and (iii) the prominence of financial stability references in central bank monetary policy statements. We then include our FSO index in a modified Taylor rule, which is estimated using a cross-country panel of up to ten central banks for the period from 2000Q1 to 2014Q4. We find that in episodes of high financial stability risks, measured by a strongly positive credit to GDP gap, "leaning-type" central banks, i.e., those with a high FSO index value, appear to account for financial stability considerations in their monetary policy rate decisions. For "cleaning-type" central banks, we do not find this to be the case. Our baseline specification suggests that a representative leaning-type central bank's policy rate is about 0.3 percentage points higher when financial stability risks are present than the policy rate of a representative cleaning-type central bank. We also find that the strength of this response increases in the additional presence of a house price boom but not so for the simultaneous occurrence of an equity price boom. JEL classification: E5, E4, G01 Bank classification: Monetary policy framework; Financial stability; International topicsRésumé L'atteinte des objectifs des banques centrales en matière de stabilité des prix peut présenter des défis lorsque des risques pèsent sur la stabilité financière. Les banques centrales gèrent toutefois très différemment les unes des autres les arbitrages potentiels qui découlent de ces deux pôles. Dans cette étude, nous examinons les cadres de politique institutionne...

The author empirically tests two aspects of the interaction between financial variables and inventory investment: negative cash flow and finance constraints due to asymmetric information. This is one of the first studies of inventory investment and finance constraints using Canadian data. A sample of Canadian manufacturing firms over the period 1992Q2-1999Q4 is split into subsamples based on age, bond rating, and size to reflect expected differences in degrees of asymmetric information problems. The findings are consistent with a model in which inventory investment is a U-shaped function of cash flow. Higher degrees of information asymmetry do not appear to generate differences in the sensitivity of inventory investment to cash flow during the sample period.

Social learning models of investment provide an interesting explanation for sudden changes in investment behaviour. Caplin and Leahy (1994) develop a model of social learning in which agents learn about the true state of demand from the investment suspension decisions of other agents. The author tests the main predictions of Caplin and Leahy's model using a unique database of investment projects undertaken by semiconductor plants. She finds that firms that are installing a significant new technology appear to be influenced by social learning, because they are more likely to suspend their investment project when other suspensions occur. A 1 per cent increase in the number of other suspensions increases by 3.6 per cent the probability that an average new technology plant will suspend their investment project. Suspensions by other agents also significantly affect plants that use conventional technology, but that effect is negative. The conventional technology plants are less likely to suspend their investment project when other firms suspend, which suggests that their payoffs are strategic substitutes, as in a "war-of-attrition" game.