November 7, 2017
Credit and credit aggregates, Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, International financial markets, Lender of last resort, Market structure and pricing, Monetary policy implementation, Payment clearing and settlement systems
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Digitalization and Inflation: A Review of the Literature
In the past few years, many have postulated that the possible disinflationary effects of digitalization could explain the subdued inflation in advanced economies. In this note, we review the evidence found in the literature. We look at three main channels. -
Complementing the Credit Risk Assessment of Financial Counterparties with Market-Based Indicators
The Bank’s internal credit risk assessment abilities are regularly enhanced. In this note, we present a recent innovation that extends the set of market-based indicators used in the credit risk assessment of financial counterparties. -
Can the Canadian International Investment Position Stabilize a Slowing Economy?
In this note, we find that valuation effects can act as an important stabilizer, strengthening Canada’s net external wealth when its economic outlook worsens relative to that of other countries. -
Measuring Limits of Arbitrage in Fixed-Income Markets
We use relative value to measure limits to arbitrage in fixed-income markets. Relative value captures apparent deviations from no-arbitrage relationships. It is simple, intuitive and can be computed model-free for any bond. -
Policy Rules for Capital Controls
This paper attempts to borrow the tradition of estimating policy reaction functions in monetary policy literature and apply it to capital controls policy literature. Using a novel weekly dataset on capital controls policy actions in 21 emerging economies over the period 1 January 2001 to 31 December 2015, I examine the mercantilist and macroprudential motivations for capital control policies. -
October 3, 2017
Seeking Gazelles in Polar Bear Country
Deputy Governor Sylvain Leduc discusses the decline in firm creation and productivity in the Canadian economy. -
A Counterfactual Valuation of the Stock Index as a Predictor of Crashes
Stock market fundamentals would not seem to meaningfully predict returns over a shorter-term horizon—instead, I shift focus to severe downside risk (i.e., crashes). -
Aggregate Fluctuations and the Role of Trade Credit
In an economy where production takes place in multiple stages and is subject to financial frictions, how firms finance intermediate inputs matters for aggregate outcomes. This paper focuses on trade credit—the lending and borrowing of input goods between firms—and quantifies its aggregate impacts during the Great Recession. -
The MacroFinancial Risk Assessment Framework (MFRAF), Version 2.0
This report provides a detailed technical description of the updated MacroFinancial Risk Assessment Framework (MFRAF), which replaces the version described in Gauthier, Souissi and Liu (2014) as the Bank of Canada’s stress-testing model for banks with a focus on domestic systemically important banks (D-SIBs).