Staff working papers
Early Warning of Financial Stress Events: A Credit-Regime-Switching ApproachWe propose an early warning model for predicting the likelihood of a financial stress event for a given future time, and examine whether credit plays an important role in the model as a non-linear propagator of shocks.
Measuring Systemic Risk Across Financial Market InfrastructuresWe measure systemic risk in the network of financial market infrastructures (FMIs) as the probability that two or more FMIs have a large credit risk exposure to the same FMI participant.
Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest RatesThe author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.
Predicting Financial Stress Events: A Signal Extraction ApproachThe objective of this paper is to propose an early warning system that can predict the likelihood of the occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behaviour in the periods preceding a financial stress event.
A Semiparametric Early Warning Model of Financial Stress EventsThe 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.
Measuring Systemic Importance of Financial Institutions: An Extreme Value Theory ApproachIn this paper, we define a financial institution’s contribution to financial systemic risk as the increase in financial systemic risk conditional on the crash of the financial institution. The higher the contribution is, the more systemically important is the institution for the system.
Identifying Asymmetric Comovements of International Stock Market ReturnsBased on a new approach for measuring the comovements between stock market returns, we provide a nonparametric test for asymmetric comovements in the sense that stock market downturns will lead to stronger comovements than market upturns.
Financial Stress, Monetary Policy, and Economic ActivityThis paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold.
A Consistent Test for Multivariate Conditional DistributionsWe propose a new test for a multivariate parametric conditional distribution of a vector of variables yt given a conditional vector xt.
Bank of Canada Review articles
November 18, 2010