Jesus Sierra is a Senior Analyst at the Financial Markets Department at the Bank of Canada. His primary interests are the effects of international capital flows on interest rates, the relationship between household finance and mutual fund flows, and the impact of monetary policy on the risk-taking behavior of financial market participants. In addition, he has been a part of the team that advises Senior Management on recent regulatory reform proposals related to Shadow Banking. Jesus received his PhD in Finance from the Marshall School of Business at the University of Southern California.
This paper documents a link between the real and financial sides of the economy. We find that retail equity mutual fund flows in Canada are negatively related to current and past changes in a component of the prime and 5-year mortgage rates that is uncorrelated with government rates.Topics: Financial services; Interest rates
The financial crisis of 2007-09 and the subsequent extended period of historically low real interest rates have revived the question of whether economic agents are willing to take on more risk when interest rates remain low for a prolonged time period. This increased appetite for risk, which causes economic agents to search for investment assets and strategies that generate higher investment returns, has been called the risk-taking channel of monetary policy. Recent academic research on banks suggests that lending policies in times of low interest rates can be consistent with the existence of a risk-taking channel of monetary policy in Europe, South America, the United States and Canada. Specifically, studies find that the terms of loans to risky borrowers become less stringent in periods of low interest rates. This risk-taking channel may amplify the effects of traditional transmission mechanisms, resulting in the creation of excessive credit.Topics: Financial Institutions; Monetary policy framework
This paper studies the impact of international capital flows on asset prices through risk premia. We investigate whether foreign purchases of U.S. Treasury securities significantly contributed to the decline in excess returns on long-term bonds between 1995 and 2008.Topics: Financial markets