The degree to which financial constraint is binding is often not directly observable in commonly used business data sets (e.g., Compustat). In this paper, we measure and estimate the likelihood of a firm being constrained by external financing using a data set of small- and medium-sized Canadian firms.
In this paper, we argue that differences in the cost structures across sectors play an important role in firms’ decisions to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers.
This paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency.
This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers.
We assess the importance of downward nominal wage rigidity (DNWR) in Canada using both firm- and worker-level microdata. In particular, we analyze employer-level administrative data from the Major Wage Settlements (MWS) and household-based survey data from the Survey of Labour Income Dynamics (SLID).
Interconnectedness among insurers and reinsurers at a global level is not well understood and may pose a significant risk to the sector, with implications for the macroeconomy. Models of the complex interactions among reinsurers and with other participants in the financial system and the real economy are at a very early stage of development.
This paper analyzes the implications of the global financial cycle for conventional and unconventional monetary policies and macroprudential policy in small, open economies such as Canada. The paper starts by summarizing recent work on financial cycles and their growing correlation across borders.
Press releases announcing and explaining monetary policy decisions play a critical role in the communication strategy of central banks. Because of their market-moving potential, it is particularly important how they are drafted. Often, central banks start from the previous statement and update the earlier text with only small changes.
In a simple two-sector New Keynesian model, sticky prices generate a counterfactual negative comovement between the output of durable and nondurable goods following a monetary policy shock. We show that heterogeneous factor markets allow any combination of strictly positive price stickiness to generate positive output comovement.
We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model.