November 23, 2003
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379
result(s)
Governance and Financial Fragility: Evidence from a Cross-Section of Countries
Staff Working Paper 2003-34
Michael Francis
The author explores the role of governance mechanisms as a means of reducing financial fragility. First, he develops a simple theoretical general-equilibrium model in which instability arises due to an agency problem resulting from a conflict of interest between the borrower and lender.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Financial markets
JEL Code(s):
G,
G0
An Empirical Analysis of Liquidity and Order Flow in the Brokered Interdealer Market for Government of Canada Bonds
Staff Working Paper 2003-28
Chris D'Souza,
Charles Gaa,
Jing Yang
The authors empirically measure Canadian bond market liquidity using a number of indicators proposed in the literature and detail, for the first time, price and trade dynamics in the Government of Canada secondary bond market. They find, consistent with Inoue (1999), that the Canadian brokered interdealer fixed-income market is relatively liquid for its size.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Market structure and pricing
JEL Code(s):
G,
G1,
G10,
G14
Measuring Interest Rate Expectations in Canada
Staff Working Paper 2003-26
Grahame Johnson
Financial market expectations regarding future policy actions by the Bank of Canada are an important input into the Bank's decision-making process, and they can be measured using a variety of sources. The author develops a simple expectations-based model to focus on measuring interest rate expectations that are implied by the current level of money market yields.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Interest rates
JEL Code(s):
G,
G1
Income Trusts - Understanding the Issues
Staff Working Paper 2003-25
Michael R. King
An income trust is an investment vehicle that distributes cash generated by a set of operating assets in a tax-efficient manner. The market capitalization of income trusts has grown rapidly over the past two years, reaching $45 billion at year-end 2002.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets
JEL Code(s):
G,
G1,
G12,
G3
Essays on Financial Stability
Technical Report No. 95
John Chant,
Alexandra Lai,
Mark Illing,
Fred Daniel
The four essays published here provide a useful overview for anyone interested in understanding the issues and policy environment surrounding financial system stability.
Content Type(s):
Staff research,
Technical reports
Topic(s):
Financial institutions,
Financial markets
JEL Code(s):
G,
G2,
G28
August 23, 2003
Financial Developments in Canada: Past Trends and Future Challenges
Freedman and Engert focus on the changing pattern of lending and borrowing in Canada in the past thirty to forty years, including the types of financial instruments used and the relative roles of financial institutions and financial markets. They examine how borrowing mechanisms have changed over time and consider the challenges facing the Canadian financial sector, including whether our financial markets are in danger of disappearing because of the size and pre-eminence of U.S. financial markets. Some of the trends examined here include syndicated lending, securitization, and credit derivatives, a form of financial engineering that has become increasingly important in the last few years. They also study bond and equity markets to determine whether Canadian capital markets have been hollowed out or abandoned by Canadian firms and conclude that the data do not provide much support for that view.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial institutions,
Financial markets,
Financial services,
Recent economic and financial developments
August 22, 2003
Measuring Interest Rate Expectations in Canada
Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. An accurate measure of their expectations can therefore help policy-makers assess the potential impact of contemplated changes. Johnson focuses on the expectations hypothesis, which measures expectations of future levels of the target overnight rate as implied by current money market yields. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates,
Financial markets,
Interest rates
What Does the Risk-Appetite Index Measure?
Staff Working Paper 2003-23
Miroslav Misina
Explanations of changes in asset prices as being due to exogenous changes in risk appetite, although arguably controversial, have been popular in the financial community and have also received some attention in attempts to account for recent financial crises. Operational versions of these explanations are based on the assumption that changes in asset prices can be decomposed into a part that can be attributed to changes in riskiness and a part attributable to changes in risk aversion, and that some quantitative measure can capture these effects in isolation.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Financial markets
JEL Code(s):
G,
G1,
G12
The U.S. Stock Market and Fundamentals: A Historical Decomposition
Staff Working Paper 2003-20
David Dupuis,
David Tessier
The authors identify the fundamentals behind the dynamics of the U.S. stock market over the past 30 years. They specify a structural vector-error-correction model following the methodology of King, Plosser, Stock, and Watson (1991).
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets
JEL Code(s):
G,
G1