October 14, 2007
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2334
result(s)
October 13, 2007
Estimating the Cost of Equity for Canadian and U.S. Firms
Financing costs are important for both firms and the economy, affecting investment decisions and, ultimately, economic growth. Despite concern among policy-makers that the cost of equity financing may be higher in Canada than in the United States, empirical evidence supporting this view is mixed. Yet Canadian firms may not undertake as many projects that could potentially enhance growth if the cost of equity financing in Canada is relatively high. The article summarizes research by Jonathan Witmer and Lorie Zorn on the influences on the cost of equity in Canada and the United States, using an updated methodology that controls for firm characteristics and aggregate-level factors. In their sample, the cost of equity was 30–50 basis points higher in Canada over 1988 to 2006 but appears to have dropped in the post-1997 period. The results have policy implications related to such factors as firm size, disclosure, and securities regulation and enforcement.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets,
International topics
October 12, 2007
Bank of Canada Workshop on Derivatives Markets in Canada and Beyond
At this 2006 workshop hosted by the Bank of Canada, an international group of market participants, regulators, and policy-makers gathered to assess recent developments in the derivatives market. Among the topics discussed were the recent prodigious growth in risk-transfer instruments, including credit derivatives and inflation-linked derivatives, as well as the accompanying challenges and benefits. Overall, the development of derivatives markets was seen as providing broad economic benefits, including more complete financial markets, improved market liquidity, and increased capacity of the financial system to effectively price and bear risk. Yet concern was also voiced that market participants do not fully understand the risks that arise in trading credit derivatives.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets,
Financial stability,
Financial system regulation and policies
October 10, 2007
The Canadian Journey: An Odyssey into the Complex World of Bank Note Production
For many years, the Bank of Canada successfully responded to occasional eruptions in counterfeiting by improving the security features on bank notes. The surge in counterfeiting that occurred while the Bank prepared to launch the Canadian Journey series, however, reflected increasingly rapid advances in computer technology that were changing the counterfeiting environment. The article describes these and other challenges that affected the new series and describes how the Bank developed a comprehensive new approach to its currency program and incorporated the valuable lessons it learned from these challenges. Designed to combat counterfeiting and meet the needs of the public, the new strategy includes increased research and development on new bank note security features, an intensified focus on retailer and public education, and a focus on law enforcement.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Bank notes,
Central bank research
Rediscounting Under Aggregate Risk with Moral Hazard
Staff Working Paper 2007-51
James Chapman,
Antoine Martin
Freeman (1999) proposes a model in which discount window lending and open market operations have different effects. This is important because in most of the literature, these policies are indistinguishable.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Central bank research,
Financial markets,
Payment clearing and settlement systems
JEL Code(s):
E,
E5,
E58,
G,
G2,
G20
Do Firms Adjust Toward a Target Leverage Level?
Staff Working Paper 2007-50
Zhaoxia Xu
This paper studies capital structure adjustment mechanisms of firms that experience substantial changes in leverage.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
International topics
JEL Code(s):
G,
G3,
G32
Examining Simple Joint Macroeconomic and Term-Structure Models: A Practitioner's Perspective
Staff Working Paper 2007-49
David Bolder,
Shudan Liu
The primary objective of this paper is to compare a variety of joint models of the term structure of interest rates and the macroeconomy.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Financial markets,
Interest rates
JEL Code(s):
C,
C0,
C6,
E,
E4,
G,
G1
The Direct Effect of China on Canadian Consumer Prices: An Empirical Assessment
Staff Discussion Paper 2007-10
Louis Morel
The author investigates the direct effect of Chinese imported goods on consumer prices in Canada. On average, over the 2001–06 period, the direct effect of consumer goods imported from China is estimated to have reduced the inflation rate by about 0.1 percentage points per year. This disinflationary effect is due to two causes: first, the […]
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Inflation and prices
JEL Code(s):
E,
E3,
E31
Hedge Funds and Financial Stability: The State of the Debate
Staff Discussion Paper 2007-9
Michael R. King,
Philipp Maier
The authors review the state of the debate on hedge funds and the potential threat that hedge funds pose to financial stability. The collapse of a hedge fund or a group of hedge funds might pose a systemic risk directly by damaging systematically important financial institutions, or indirectly by increasing market volatility and generating a […]
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Financial institutions,
Financial stability,
Financial system regulation and policies
JEL Code(s):
G,
G1,
G15,
G18,
G2
The Bank of Canada's Version of the Global Economy Model (BoC-GEM)
Technical Report No. 98
René Lalonde,
Dirk Muir
The Bank of Canada's version of the Global Economy Model (BoC-GEM) is derived from the model created at the International Monetary Fund by Douglas Laxton (IMF) and Paolo Pesenti (Federal Reserve Bank of New York and National Bureau of Economic Research).
Content Type(s):
Staff research,
Technical reports
Topic(s):
Business fluctuations and cycles,
Economic models,
International topics
JEL Code(s):
C,
C6,
C68,
E,
E2,
E27,
E3,
E37,
F,
F3,
F32,
F4,
F47