E44 - Financial Markets and the Macroeconomy
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Monetary Policy and Cross-Border Interbank Market Fragmentation: Lessons from the Crisis
We present a two-country model featuring risky lending and cross-border interbank market frictions. -
Is the stock market pricing in a V‑shaped recovery?
Major stock indexes have bounced back from their March 23 trough to about 10 percent below their peaks. However, stocks that are more sensitive to the business cycle have not performed as well during this market rally. This suggests that stock markets are pricing in a slower, shallower economic recovery. -
The potential effect of a central bank digital currency on deposit funding in Canada
A retail central bank digital currency denominated in Canadian dollars could, in theory, create competition for bank deposit funding. -
Canadian Financial Stress and Macroeconomic Conditions
Severe disruptions in the financial markets, as observed during the 2008 global financial crisis or the COVID-19 pandemic, can impair the stability of the entire financial system and worsen macroeconomic downturns. -
The Effect of Oil Price Shocks on Asset Markets: Evidence from Oil Inventory News
We quantify the reaction of U.S. equity, bond futures, and exchange rate returns to oil price shocks driven by oil inventory news. -
Managing GDP Tail Risk
Models for macroeconomic forecasts do not usually take into account the risk of a crisis—that is, a sudden large decline in gross domestic product (GDP). However, policy-makers worry about such GDP tail risk because of its large social and economic costs. -
Furor over the Fed : Presidential Tweets and Central Bank Independence
We illustrate how market data can be informative about the interactions between monetary and fiscal policy. Federal funds futures are private contracts that reflect investor’s expectations about monetary policy decisions. -
What Does Structural Analysis of the External Finance Premium Say About Financial Frictions?
I use a structural vector autoregression (SVAR) with sign restrictions to provide conditional evidence on the behavior of the US external finance premium (EFP). The results indicate that the excess bond premium, a proxy for the EFP, reacts countercyclically to supply and monetary policy shocks and procyclically to demand shocks. -
Financial Frictions, Durable Goods and Monetary Policy
Financial frictions affect how much consumers spend on durable and non-durable goods. Borrowers can face both loan-to-value (LTV) constraints and payment-to-income (PTI) constraints.