Staff discussion papers

• Price-Level Targeting

  Staff Discussion Paper 2007-8 Agathe Côté

  In November 2006, the Bank of Canada announced its intention to lead a concerted research program over the next few years on the type of monetary policy framework that would best contribute to the economic well-being of Canadians in the decades ahead. The research will focus on two broad questions: whether economic welfare might be […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Monetary policy framework JEL Code(s): E, E5, E52, E58

• A Note on Contestability in the Canadian Banking Industry

  Staff Discussion Paper 2007-7 Jason Allen, Ying Liu

  The authors examine the degree of contestability in the Canadian banking system using the H-statistic proposed by Panzar and Rosse (1987) and modified by Bikker, Spierdijk, and Finnie (2006). A modification is necessary because the standard approach of controlling for size using total assets leads to an upward bias in the H-statistic. The authors propose […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions JEL Code(s): G, G2, G21, L, L1, L11

• Asset-Price Misalignments and Monetary Policy: How Flexible Should Inflation-Targeting Regimes Be?

  Staff Discussion Paper 2007-6 Jack Selody, Carolyn A. Wilkins

  The authors analyze the extent to which inflation-targeting frameworks should incorporate flexibility in order to respond to asset-price misalignments and other atypical events. They examine the costs and benefits of adding flexibility to the Bank's current inflation-targeting framework, and conclude that maintaining low and stable consumer price inflation is the best contribution that monetary policy […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation targets, Monetary policy framework JEL Code(s): E, E5, E6

• Unanticipated Defaults and Losses in Canada's Large-Value Payments System, Revisited

  Staff Discussion Paper 2007-5 Devin Ball, Walter Engert

  Recent work at the Bank of Canada studied the impact of default in Canada’s large-value payments system, and concluded that participants could readily manage their potential losses (McVanel 2005). In an extension of that work, the authors use a much larger set of daily payments data – with three times as many observations – to […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Payment clearing and settlement systems JEL Code(s): E, E4, E44, E47, G, G2, G21

• Should Central Banks Adjust Their Target Horizons in Response to House-Price Bubbles?

  Staff Discussion Paper 2007-4 Meenakshi Basant Roi, Rhys R. Mendes

  The authors investigate the implications of house-price bubbles for the optimal inflation-target horizon using a dynamic general-equilibrium model with credit frictions, house-price bubbles, and small open-economy features. They find that, given the distribution of shocks and inflation persistence over the past 25 years, the optimal target horizon for Canada tends to be at the lower […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Credit and credit aggregates, Economic models, Inflation targets, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E4, E42, E44, E5, E52, E58, E6, E61

• Vulnerabilities in Defined-Benefit Pension Plans

  Staff Discussion Paper 2007-3 Jack Selody

  An effective pension system enhances economic and financial efficiency. A majority of pension plans in Canada are defined-benefit (DB) plans, but DB plans are under stress from increasing longevity, low long-term interest rates, and the shrinking equity premium. DB plans are vulnerable to such shocks because they are complex financial vehicles, with interdependencies not fully […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions JEL Code(s): G, G2, G23

• Implications of New Accounting Standards for the Bank of Canada's Balance Sheet

  Staff Discussion Paper 2007-2 Mark Zelmer, Grahame Johnson

  The Canadian Institute of Chartered Accountants (CICA) has implemented new accounting standards for the valuation and reporting of financial instruments. They are effective for the Bank of Canada in 2007. As a result of these changes, the Bank has begun valuing its holdings of Government of Canada treasury bills on a fair value basis and […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Monetary policy framework JEL Code(s): E, E5, E58, M, M4

• The Zero Bound on Nominal Interest Rates: Implications for the Optimal Monetary Policy in Canada

  Staff Discussion Paper 2007-1 Claude Lavoie, Hope Pioro

  The authors assess the performance of the Canadian economy under a variety of interest rate rules when the zero bound on nominal interest rates can bind. Their assessment is based on numerical simulations of a dynamic stochastic general-equilibrium model in a stochastic environment. Consistent with the literature, the authors find that the probability and consequences […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation: costs and benefits, Interest rates, Monetary policy framework JEL Code(s): E, E4, E43, E47, E5, E52