Understanding the factors that determine the migration of labour between regions is crucial for assessing the economy’s response to macroeconomic shocks and identifying policies that will encourage an efficient reallocation of labour. By examining the determinants of migration within Canada from 1991 to 2006, this article provides evidence that regional differences in employment rates and household incomes tend to increase labour migration, and that provincial borders and language differences are barriers to migration.
Topics: Econometric and statistical methods; Labour markets; Regional economic developmentsThe authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States.
Topics: Econometric and statistical methods; Financial stabilityA longstanding finding in the forecasting literature is that averaging forecasts from different models often improves upon forecasts based on a single model, with equal weight averaging working particularly well. This paper analyzes the effects of trimming the set of models prior to averaging.
Topics: Econometric and statistical methodsThis paper proposes a novel regression-based approach to the estimation of Gaussian dynamic term structure models that avoids numerical optimization.
Topics: Asset Pricing; Econometric and statistical methods; Interest ratesDefault rates are series commonly used in stress testing. In Canada, as in many other countries, there are no historical series available for sectoral default rates on bank loans to firms.
Topics: Econometric and statistical methods; Financial Institutions; Financial stabilityThis paper investigates the effect of oil price uncertainty on real economic activity using a quarterly VAR with stochastic volatility in mean. Stochastic volatility allows oil price uncertainty to vary separately from changes in the level of oil prices, and thus the impact of oil price uncertainty can be examined in a more flexible yet tractable way.
Topics: Business fluctuations and cycles; Econometric and statistical methodsOver the past 20 years, there has been a major shift away from the use of paper-based retail payment instruments, such as cash and cheques, toward electronic means of payment, such as debit cards and credit cards. Recent Bank of Canada research on consumers’ choice of payment instruments indicates that cash is frequently used for transactions with low values because of its speed, ease of use and wide acceptance, while debit and credit cards are more commonly used for transactions with higher values because of perceived attributes such as safety and record keeping. While innovations in retail payments currently being introduced into the Canadian marketplace could lead to a further reduction in the use of cash over the longer term, the implications for the use of cash of some of the structural and regulatory developments under way are less clear.
Topics: Bank notes; Econometric and statistical methods; Financial system regulation and policies; Payment clearing and settlement systemsWe provide a decomposition of nominal yields into real yields, expectations of future inflation and inflation risk premiums when real bonds or inflation swaps are unavailable or unreliable due to their relative illiquidity.
Topics: Asset Pricing; Econometric and statistical methods; Inflation and prices; Interest ratesThis paper examines the role of bank credit in modeling and forecasting business cycle fluctuations, and investigates the international transmission of US credit shocks, using a global vector autoregressive (GVAR) framework and associated country-specific error correction models.
Topics: Business fluctuations and cycles; Credit and credit aggregates; Econometric and statistical methods; International financial marketsMany studies have documented that daily realized volatility estimates based on intraday returns provide volatility forecasts that are superior to forecasts constructed from daily returns only. We investigate whether these forecasting improvements translate into economic value added.
Topics: Asset Pricing; Econometric and statistical methodsThe international business cycle is very important for Latin America’s economic performance as the recent global crisis vividly illustrated. This paper investigates how changes in trade linkages between China, Latin America, and the rest of the world have altered the transmission mechanism of international business cycles to Latin America.
Topics: Business fluctuations and cycles; Econometric and statistical methods; International topics; Recent economic and financial developments; Regional economic developmentsUsing census data at the economic region level from 1991 to 2006 and a gravity model framework, this paper examines the factors that influence migration within Canada.
Topics: Econometric and statistical methods; Labour markets; Regional economic developmentsRecent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative means of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage.
Topics: Bank notes; Econometric and statistical methods; Financial servicesWe explore the macroeconomic effects of a compression in the long-term bond yield spread within the context of the Great Recession of 2007-2009 via a time-varying parameter structural VAR model.
Topics: Econometric and statistical methods; Interest rates; Monetary policy framework; Transmission of monetary policyMany predict that innovations in retail payment may render cash obsolete. We investigate this possibility in the context of recent payment innovations such as contactless-credit and stored-value cards.
Topics: Econometric and statistical methods; Financial services; Payment clearing and settlement systemsWe examine the evolution of the effects of monetary policy shocks on the distribution of disaggregate prices and quantities of personal consumption expenditures to assess the contribution of monetary policy to changes in U.S. inflation dynamics.
Topics: Econometric and statistical methods; Transmission of monetary policyRising levels of household indebtedness have created concerns about the vulnerabilities of households to adverse economic shocks and the impact on financial stability. To assess these risks, the author presents a formal stress-testing framework that uses microdata to simulate how various economic shocks affect the distribution of the debt-service ratio (DSR) for the household sector.
Topics: Econometric and statistical methods; Financial stabilityDemand for industrial raw materials from emerging economies, particularly emerging Asia, is widely believed to have fueled the surge in oil and industrial commodity prices during 2002-2008. The paper first presents a simple storage model in which commodity prices respond to market participant’s changing expectations of the future macroeconomic environment.
Topics: Econometric and statistical methods; International topicsWhile the usefulness of factor models has been acknowledged over recent years, little attention has been devoted to the forecasting power of these models for the Japanese economy. In this paper, we aim at assessing the relative performance of factor models over different samples, including the recent financial crisis.
Topics: Econometric and statistical methods; International topicsThis article draws on theory and empirical evidence to examine a number of factors behind movements in Canadian house prices. It begins with an overview of the movements in house prices in Canada, using regional data to highlight factors that influence prices over the long run. It then turns to the central theme, that there are medium-run movements in prices not accounted for by long-run factors. Drawing on recent Bank of Canada research, the article discusses several factors behind these medium-run movements, including interest rates, expected price appreciation and market liquidity. The article concludes by identifying areas for future research that would further our understanding of fluctuations in house prices.
Topics: Asset Pricing; Econometric and statistical methods; Market structure and pricingWe use vector autoregressions with drifting coefficients and stochastic volatility to investigate how the dynamic effects of oil supply shocks on the U.S. economy have changed over time. We find a substantial decline in the short-run price elasticity of oil demand since the mid-eighties.
Topics: Econometric and statistical methods; International topicsRecently, there has been increased interest in real-time forecasts of the real price of crude oil. Standard oil price forecasts based on reduced-form regressions or based on oil futures prices do not allow consumers of forecasts to explore how much the forecast would change relative to the baseline forecast under alternative scenarios about future oil demand and oil supply conditions.
Topics: Econometric and statistical methods; International topicsThis paper examines the effectiveness of international capital controls in India over time by analyzing daily return differentials in the non-deliverable forward (NDF) markets using the self-exciting threshold autoregressive (SETAR) methodology.
Topics: Econometric and statistical methods; International financial markets; International topicsThere has been a systematic increase in the volatility of the real price of crude oil since 1986, followed by a decline in the volatility of oil production since the early 1990s. We explore reasons for this evolution. We show that a likely explanation of this empirical fact is that both the short-run price elasticities of oil demand and of oil supply have declined considerably since the second half of the 1980s.
Topics: Econometric and statistical methods; International topicsWe examine nine changes in the New York State Security Transaction Taxes (STT) between 1932 and 1981. We find that imposing or increasing an STT results in wider bidask spreads, lower volume, and increased price impact of trades.
Topics: Econometric and statistical methods; Financial markets; Market structure and pricing
