May 12, 1998
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2333
result(s)
May 11, 1998
The use of forward rate agreements in Canada
In this article, the authors identify forward rate agreements, or FRAs, as short-term interest rate guarantee instruments negotiated by two parties, one of which is typically a bank. In outlining the main features of FRAs, the authors contrast them with BAX contracts (futures contracts on bankers' acceptances that are negotiated through the Montreal Exchange). The article then describes how market participants use FRAs to cover short-term interest rate risk. The final section deals with the way the Bank of Canada uses information from the FRA market as an indicator of interest rate expectations. Econometric models used to retrieve information from FRA rates, as well as the underlying assumptions, are discussed in an appendix.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets,
Monetary and financial indicators
Uncertainty and Multiple Paradigms of the Transmission Mechanism
Staff Working Paper 1998-7
Walter Engert,
Jack Selody
An important challenge facing central banks is making decisions under uncertainty about the dynamic effects of monetary policy actions. The authors stress the importance of explicitly recognizing uncertainty about the transmission mechanism when formulating policy advice. They argue that one way to manage monetary policy under uncertainty is to draw on both an output-gap paradigm […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary policy and uncertainty,
Monetary policy framework
JEL Code(s):
E,
E5
Forecasting Inflation with the M1-VECM: Part Two
Staff Working Paper 1998-6
Walter Engert,
Scott Hendry
A central bank's main concern is the general direction of future inflation, and not transitory fluctuations of the inflation rate. As a result, this paper is concerned with forecasting a simple measure of the trend of inflation, the eight-quarter CPI-inflation rate. The primary objective is to improve the M1-based vector-error-correction model (VECM) developed by Hendry […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Inflation and prices,
Monetary aggregates
JEL Code(s):
C,
C3,
C5,
E,
E3,
E4,
E5
Predicting Canadian Recessions Using Financial Variables: A Probit Approach
Staff Working Paper 1998-5
Joseph Atta-Mensah,
Greg Tkacz
This paper examines the ability of a number of financial variables to predict Canadian recessions. Regarding methodology, we follow closely the technique employed by Estrella and Mishkin (1998), who use a probit model to predict U.S. recessions up to eight quarters in advance. Our main finding is that the spread between the yield on Canadian […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Interest rates
JEL Code(s):
E,
E3,
E32,
E4,
E43
The Benefits of Low Inflation: Taking Stock
Technical Report No. 83
Brian O'Reilly
This paper surveys the empirical literature on the benefits of low inflation, emphasizing contributions since 1990. It follows the framework of a section in the Bank's 1990 Annual Report, "The benefits of price stability."
Content Type(s):
Staff research,
Technical reports
Topic(s):
Inflation: costs and benefits
JEL Code(s):
E,
E3
A Discussion of the Reliability of Results Obtained with Long-Run Identifying Restrictions
Staff Working Paper 1998-4
Pierre St-Amant,
David Tessier
In a recent article, Faust and Leeper (1997) discuss reasons why inference from structural VARs identified with long-run restrictions may not be reliable. In this paper, the authors argue that there are reasons to believe that Faust and Leeper's arguments are not devastating in practice. First, simulation exercises suggest that this approach does well when […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods
JEL Code(s):
C,
C3
Tendance des dépenses publiques et de l'inflation et évolution comparative du taux de chômage au Canada et aux États-Unis
Staff Working Paper 1998-3
Pierre St-Amant,
David Tessier
The authors' purpose in this paper is to isolate the respective contributions of budgetary and monetary policy in Canada and the United States to the behaviour of unemployment rates in the two countries. Their method consists of estimating VAR models and using long-term identification restrictions to perform a structural analysis. Budgetary policy shocks are defined […]
The Financial Services Sector: Past Changes and Future Prospects
Technical Report No. 82
Charles Freedman,
Clyde Goodlet
The financial services industry has been undergoing significant change in recent years. This paper analyzes some key developments affecting the industry and examines some important issues facing the industry and its regulators.
The Canadian Banking System
Technical Report No. 81
Charles Freedman
This paper examines the major changes in the Canadian banking system since the Second World War, with special attention paid to the differences between Canadian and U.S. developments over this period.
Content Type(s):
Staff research,
Technical reports
Topic(s):
Financial institutions
JEL Code(s):
G,
G2