April 15, 2007
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2333
result(s)
April 14, 2007
The Canadian Overnight Market: Recent Evolution and Structural Changes
Since 1997 when the Bank of Canada last published a review of the Canadian overnight market, several important changes have affected the market's structure and dynamics. Reid provides a current overview of the market, examining the financial instruments, market transparency and flows, and the collateralized overnight rate as it has evolved since the introduction of the Large Value Transfer System and the fixed announcement dates. Other significant influences include changes in market practices regarding risk management, the rise of securities lending, the increased demand for collateral, and the Bank of Canada's measures to reinforce the target for the overnight rate.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Market structure and pricing,
Monetary policy framework,
Monetary policy implementation
April 13, 2007
The Large-Value Payments System: Insights from Selected Bank of Canada Research
Given the Bank of Canada's strong interest in the safe and efficient operation of major clearing and settlement systems, the Bank maintains a rigorous research agenda as a means of informing payments system policy and oversight. In this article, Arjani and Engert review recent research undertaken by Bank staff concerning the risk and efficiency of the Large Value Transfer System (LVTS). Based on the findings from this research, the authors conclude that the design of the LVTS strikes an effective balance between risk and efficiency. The article also demonstrates the increased use of simulation analysis as a tool for conducting payments system research. A brief summary of the Bank's oversight strategy for systemically important payments systems is also provided. Goals for future research are noted as well, including modelling of participant behaviour and continued external collaboration with other researchers.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial institutions,
Payment clearing and settlement systems
Term Structure Transmission of Monetary Policy
Staff Working Paper 2007-30
Sharon Kozicki,
P. A. Tinsley
Under bond-rate transmission of monetary policy, the authors show that a generalized Taylor Principle applies, in which the average anticipated path of policy responses to inflation is subject to a lower bound of unity. This result helps explain how bond rates may exhibit stable responses to inflation, even in periods of passive policy.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Interest rates,
Monetary policy transmission
JEL Code(s):
E,
E3,
E5,
N,
N1
Exchange Rate Regimes, Globalisation, and the Cost of Capital in Emerging Markets
Staff Working Paper 2007-29
Antonio Diez de los Rios
This paper presents a multifactor asset pricing model for currency, bond, and stock returns for ten emerging markets to investigate the effect of the exchange rate regime on the cost of capital and the integration of emerging financial markets. Since there is evidence that a fixed exchange rate regime reduces the currency risk premia demanded by foreign investors, the tentative conclusion is that a fixed exchange rate regime system can help reduce the cost of capital in emerging markets.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Development economics,
Exchange rate regimes
JEL Code(s):
F,
F3,
F30,
F33,
G,
G1,
G15
Modelling Payments Systems: A Review of the Literature
Staff Working Paper 2007-28
Jonathan Chiu,
Alexandra Lai
Payments systems play a fundamental role in an economy by providing the mechanisms through which payments arising from transactions can be settled. The existing literature on the economics of payments systems is large but loosely organized, in that each model uses a distinct set-up and sometimes a distinct equilibrium concept.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Payment clearing and settlement systems
JEL Code(s):
E,
E4,
E42,
E5,
E58,
G,
G2,
G21
Price Formation and Liquidity Provision in Short-Term Fixed Income Markets
Staff Working Paper 2007-27
Chris D'Souza,
Ingrid Lo,
Stephen Sapp
Differences in market structures may affect the manner in which fundamental information is incorporated into prices. High levels of quote and trade transparency plus substantial quoting obligations in European government securities markets ensure that prices are informationally efficient.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Interest rates,
Market structure and pricing
JEL Code(s):
G,
G1,
G12,
G14,
G15
Optimal Monetary Policy and Price Stability Over the Long-Run
Staff Working Paper 2007-26
Oleksiy Kryvtsov,
Malik Shukayev,
Alexander Ueberfeldt
This paper examines the role of monetary policy in an environment with aggregate risk and incomplete markets. In a two-period overlapping-generations model with aggregate uncertainty and nominal bonds, optimal monetary policy attains the ex-ante Pareto optimal allocation.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy framework
JEL Code(s):
E,
E5
Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures
Staff Working Paper 2007-25
Alejandro García,
Ramazan Gençay
We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Financial markets,
Financial stability
JEL Code(s):
C,
C1,
C10,
G,
G0,
G00,
G1,
G10
Corporate Balance Sheets in Developed Economies: Implications for Investment
Staff Working Paper 2007-24
Denise Côté,
Christopher Graham
In this paper, the authors examine the aggregate national balance-sheets of non-financial corporations in Australia and the G7 countries with a view to assessing both their financial structure and their financial position. More importantly, the authors investigate whether the financial position of non-financial corporations (i.e., debt-to-equity ratio) is material to the economy's investment prospects and whether the importance of this channel differs depending on the structure of corporate financing i.e., bank-based or market-oriented financing structures.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
International topics
JEL Code(s):
E,
E2,
E22,
E3,
E32,
E4,
E44